Decision Making for Repair Versus Replacement of Highway Operations Equipment (2023)

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P A R T I I I User Manual for the 4R Tool

37   1.1 Background The decision to repair, rebuild, replace, or retire a downed piece of equipment can represent a major capital expenditure for fleet operators. A nonfunctioning piece of equipment can severely impact the ability for a transportation agency to successfully deliver services and perform its mission, and the criticality of the equipment in question may drive an immediate response to making a repair, rebuild, replace, or retire decision. Through NCHRP Project 13-08, researchers developed a readily usable methodology, supportive computational tools, and examples of effective practices for (1) describing and evaluating repair, rebuild, replace, or retire options when a particular piece of highway maintenance equipment fails and (2) judging which option represents the best value for the fleet and agency. The 4R Tool presented here provides guidance to fleet managers for making repair, rebuild, replace, or retire decisions through a replicable, transparent, and data-driven method. This User Manual describes how to use the 4R Tool, its intended applications and limitations, hypothetical examples of tool inputs and results, and guidance for how to communicate the results of the analysis to inform decision making. 1.2 About this User Manual This User Manual summarizes how to use the 4R Tool and includes the following chapters: • Chapter 1. Introduction – Background, purpose, and capabilities of the 4R Tool. • Chapter 2. Limitations of the 4R Tool – Limitations of the tool and inapplicable applications. • Chapter 3. 4R Tool Installation – Operational requirements for use of the tool. • Chapter 4. Data Preparation – Types of data and sources. • Chapter 5. Running the 4R Tool Decision Module – Operations guide and interpreting results. • Chapter 6. Running the 4R Tool Economic Analysis Module – Operations guide and inter- preting results. • Chapter 7. Outputs and Printing – Printing outputs of the 4R Tool Decision Module for reference. • Chapter 8. Use Case Examples of Decision Module – Nine use case examples with inputs and results from the Decision Module. • Chapter 9. Use Case Example of Economic Analysis Module – Detailed examples of how to make inputs and view results from the Economic Analysis Module. • Chapter 10. Communications Guide – Supporting material for communicating the purpose, structure, and results of the 4R Tool for various audiences. Introduction C H A P T E R   1

38 Decision Making for Repair Versus Replacement of Highway Operations Equipment 1.3 4R Tool Capabilities The 4R Tool has two independent modules that have different capabilities. The intent of the 4R Tool is to enable users to evaluate repair, rebuild, replace, and retire options when a particular piece of highway maintenance equipment fails and to determine which option represents the best value for the fleet and agency. The Decision Module uses quantitative and qualitative user input to determine the best decision for a downed piece of equipment. The Economic Analysis Module uses historical usage data and cost data from the equipment to illustrate the age in the future at which one outcome (e.g., repair) has an economic advantage over the others. The features of the Decision Module include the following: • 19 qualitative and quantitative criteria scored on a scale of 0 to 100. • Recommendations on the repair, rebuild, replace, or retire decision. • Weights for each criterion, allowing the user flexibility in modifying the level of importance of each criterion as needed. • Checkboxes to exclude criteria (providing additional flexibility to the user). The features of the Economic Analysis Module include the following: • Assessment of the future economic impacts of repair, rebuild, replace, and retire decisions. • Assessment of the total cost rate of a repair, rebuild, replace, or retire decision using straight line, sum of years’ digits, and declining balance depreciation. • Comparing the adjusted total cost rate by equipment age for a repair, rebuild, replace, or retire decision to determine the benefit (or cost) of delaying a decision. • Identification of the year in the future that a specific repair, rebuild, replace, or retire decision becomes the most cost-effective option. 1.4 Video Supplement Two videos of Professor John Hildreth explaining the structure and functionality of the tool are available as companions to this User Manual. The videos can be found on the National Acad- emies Press website (nap.nationalacademies.org) by searching for NCHRP Research Report 1046: Decision Making for Repair Versus Replacement of Highway Operations Equipment.

39   The 4R Tool is intended to provide DOT fleet managers with guidance for systematically making repair, rebuild, replace, or retire decisions for maintenance equipment. It is a management tool for DOTs and fleet personnel (similar to any number of other documents and supporting analytical applications). Like all guidance documents, this report is intended to aid and identify helpful practices. How- ever, it is not intended to prescribe decisions. Similarly, neither this document nor the 4R Tool is intended to replace the user’s professional judgment, which must reflect the innumerable variables that drive any management decision in a specific circumstance. This report and the supporting 4R Tool are envisioned as being particularly valuable to orga- nizations like state DOTs, in which distance and geography require using decentralized decision- making processes. In such an environment, the 4R Tool and the associate guidance should encourage a consistent decision approach, even when specific circumstances suggest the need to adjust decision variables that may result in identifying different solutions from agency to agency (or even within an agency, depending on the specifics of the situation). To reflect this situational variance, the 4R Tool includes weighting features to adjust for the specifics of a given decision scenario. Similarly, the 4R Tool also includes the ability to exclude certain decision inputs when those inputs are either unavailable or perceived as not applicable. In both cases (changing decision variable weighting or excluding certain inputs), the user agency may decide to prescribe which options (weighting or exclusions) to allow end users to change as part of its implementation. 2.1 Known Limitations The 4R Tool provides fleet managers with a data-driven approach to repair and replace deci- sion making. However, certain tradeoffs were made to improve usability. The following known limitations should be considered when using the 4R Tool and interpreting results. Data Inputs May Not Be Available Although the 4R Tool was designed to allow a user to exclude inputs, certain inputs are required. For example, a user must enter a value for repair cost limit. If this limit does not exist, it will need to be estimated. Similarly, Target Replacement Age is required and will need to be estimated if this target age does not exist. Certain inputs to the Economic Analysis Module may also be unavailable. For example, the model requires A and B coefficients. These are the parameters of a life cycle cost curve (the second order polynomial) that describes the cumulative LTD operating costs for a piece of equipment. Without these values, the user will be unable to proceed with the Economic Analysis Module. Limitations of the 4R Tool C H A P T E R   2

40 Decision Making for Repair Versus Replacement of Highway Operations Equipment Data Inputs May Be Unreliable Certain inputs, like accumulated LTD cost, require high-quality data derived from the work order process. Erroneously allocated costs, or unallocated costs, will result in an inaccurate LTD cost that may skew outputs. Additionally, the organizational structure of an agency can impact a user’s access to data. For example, outsourced equipment maintenance may make obtaining reliable data on equipment repair or rebuild history more difficult. Point Values Are Subjective The number of points applied to each question in analysis tabs were decided through a rigorous review process by a team of experienced fleet practitioners. However, subjective judgment was the main driver behind these selections, as a purely objective process was not possible. Question Weights Can Skew Results The question-weighting feature was included as part of the 4R Tool to increase its relevance to the widest possible range of fleet types. However, integrating this flexibility may allow the user to preordain a particular outcome. By increasing the relative weighting of questions with inputs favorable to a particular outcome, a user may be able to bias the result. For example, a user could assign a 100-point rating to equipment condition and a zero-point rating to all other inputs, making equipment condition the sole factor in the decision-making process. Relevant Factors May Be Omitted The 4R Tool does not provide a comprehensive look at all factors related to repair, rebuild, replace, or retire decisions. Instead, the 4R Tool is intended to evaluate those factors deemed most critical to the decision-making process. Because every fleet is unique, relevant factors that some managers consider when making repair, rebuild, replace, or retire decisions may not appear in the 4R Tool. For example, some fleet managers may strongly consider original equip- ment manufacturer (OEM) resale value reputation when evaluating a repair, rebuild, replace, or retire decision, but this was omitted from the 4R Tool. 2.2 Situations Causing Irrelevant Outcomes Although the 4R Tool underwent rigorous vetting through a variety of equipment and fleet scenarios, certain situations can cause irrelevant results. The following examples of such situa- tions are not intended to form a comprehensive list. Emergency Situations An agency may face a situation in which an operable piece of critical equipment is needed as soon as possible. In this case, the decision outcome that provides the quickest return to service, whether repair or replace, is the best option. In its current form, the 4R Tool is not capable of isolating a single variable like this. Broken Supply Chains A piece of equipment may be a good candidate for repair based on factors such as repair cost, equipment age, and condition. However, if parts are unable to be sourced due to supply chain disruptions, a positive repair outcome could be irrelevant. A fleet manager may be required to

Limitations of the 4R Tool 41 source a replacement piece of equipment to perform a critical function while waiting for an extended period for the necessary parts to repair the downed equipment. For example, an agency could be considering what to do with a downed snowplow truck. A replacement unit may be ordered in May, with an estimated delivery in September. However, due to supply chain issues, the estimated delivery will be in the summer of the following year. Unfortunately, the downed snowplow truck requires major engine repairs that will now be required to keep it in service for an additional winter season. In this scenario, the 4R Tool may have provided an irrelevant replace outcome. Obsolete or Impossible-to-Source Equipment Like the broken supply chains scenario, parts for highly specialized equipment may be difficult or impossible to source. This can be compounded by seasonality, OEM insolvency, or limited availability. Certain parts may simply not be available to order. For example, truck-mounted snow blowers are often run beyond their defined useful life owing to capital fund constraints and lack of consistent use. When a critical component fails, long repair times are common because parts sourcing may extend to between 20 and 24 months. In cases such as these, a repair outcome may be irrelevant. Temporary Lack of Operating and Capital Funds A temporary disruption in the availability of both operating and capital funds can cause an irrelevant retire outcome. The 4R Tool considers the availability of operating funds to be required for a repair outcome. Similarly, the tool requires available capital funds in order to recommend a replace outcome. If neither funding source is available, the outcome will be to retire. However, if funds will be restored in the near or medium term, the most appropriate decision may be to simply store the equipment until funds become available. Unconstrained Capital Funds Agencies may find themselves in a situation in which, due to federal stimulus or budget surplus, capital funds must be spent. In this case, the most appropriate outcome is likely to be replace, even when a repair or rebuild outcome is recommended by the 4R Tool.

42 e 4R Tool can be downloaded from the National Academies Press website (nap.nation- alacademies.org) by searching for NCHRP Research Report 1046: Decision Making for Repair Versus Replacement of Highway Operations Equipment. e 4R Tool was developed for DOT sta who have basic familiarity with Microso Excel and access to information about eet equipment. Minimum system requirements needed to run the 4R Tool are as follows: • Microso Oce Suite or Oce 365 • Windows: – Windows 10 – Windows 8 – Windows 7 – Windows Server 2019 – Windows Server 2016 • Mac OS X Aer downloading the 4R Tool, users should save a copy with a unique equipment identier in the le name (e.g., “Dump Truck 999”) for each piece of equipment being assessed. Users should ensure that a green checkmark appears in the box at the top of the initiation page to conrm all default values are set, as shown in Figure 9. When opening the 4R Tool in Excel, pop-up messages may appear. Click the Enable Content button if a security warning appears toward the top of the page (Figure 10). e tool does not contain macros and should not trigger the user’s security soware. If you encounter problems when opening the document, contact your organization’s information technology representative for assistance. 4R Tool Installation C H A P T E R   3 Ready to Begin Figure 9. Conrmation of default values. Figure 10. Pop-up window that may appear when opening the workbook.

43   Operation of the 4R Tool requires the input of specific data to help fleet managers determine the best repair, rebuild, replace, or retire decision for a downed piece of equipment. These data can be either quantitative or qualitative. 4.1 Data Setup There are two types of data that can be input into the 4R Tool: • Required Data. These data are conditions that must be met for the 4R Tool to operate. • Optional Data. These data enable the user to refine tool outputs based upon selected criteria, but their absence will not prevent the tool from providing a recommendation. 4.2 Data Checklist Table 4 provides a detailed description of each of the data inputs included in the 4R Tool, includ- ing the type of input, whether or not the data is required for operation, and likely sources of the data. Data Preparation C H A P T E R   4 Input Name Question Type Required Description Data Source Estimated repair cost Numeric value Y The combined cost estimate of labor and parts to restore a unit to a pre-repair working condition. Repair costs can vary significantly once repairs are initiated. Internal: (1) Technician problem diagnosis (2) Fleet system history of costs of similar repairs (3) Professional judgment of staff External: (1) Commercial repair shop estimate (2) Commercial repair standards guide (e.g., MOTOR) Repair cost limit Numeric value Y A preestablished limit to trigger a repair, replace, or retire decision. Typically, repair cost limits are calculated as a percentage of residual or depreciated value. (1) Fleet policy, based on fleet systems records on cost estimate accuracy and repair longevity (2) Used equipment valuation guides (3) State or agency guidance Table 4. Detailed description of all user input questions in 4R Tool. (continued on next page)

Condition Sliding scale Y An evaluation of whether the condition of a given unit is “better,” “worse,” or “average” compared to other units of the same age and class. Condition is intended to reflect a physical and operational evaluation of a unit that is not otherwise reflected in its age or total usage. General body or interior condition, or unusual corrosion impacts (whether better or worse than typical) are factors that commonly have strong impacts on condition scores. (1) Equipment condition assessment standard guidance (2) Use of pictures and other general guidance to reduce user evaluation variances Operating funds availability Binary choice Y Availability of monies for the maintenance, operation, and repair of equipment. (1) Agency or department budgets (2) Rental cost funds (if rental charge-back fund system is in place) Resale value Sliding scale N The price a used equipment item will generate when sold. This value is influenced by equipment make, model, age, condition, meter reading, configuration, options, location, etc. (1) Fleet procurement or analyst (2) Used equipment valuation guides (3) Auction houses (4) Online auction services (5) Equipment brokers (6) Dealers (7) Historical sales results Input Name Question Type Required Description Data Source Age of the equipment Numeric value Y Varies somewhat by fleet practice. It is the product of the current year minus one of the following dates: (1) Date of manufacture. (2) Model year. (3) Date unit delivered (for equipment purchased new only). (4) Date unit placed in service (for equipment purchased new only). Note: Parts availability is often the constraining factor in repairing older units. (1) Equipment tag/VIN information (2) Registration information (3) Dates found in the fleet management system Target replacement age Numeric value Y The minimum age established for a given fleet class to be considered for replacement. This input question is established on a fleet-by-fleet basis and typically is just one factor considered when making unit-based replacement decisions. Fleet policy, based on a combination of factors including the following: (1) Equipment capital cost (2) Maintenance, repair, and operating cost trends over time (3) Professional judgment Table 4. (Continued).

Data Preparation 45 (continued on next page) Repair history Sliding scale N LTD chronologic and categorial history of repairs and preventive maintenance services performed on an equipment item. Repair history data provide the number of work orders, frequency, magnitude, and complexity of the repairs made as well as all LTD associated costs. (1) Fleet Management System (2) OEM repair and preventive maintenance literature (3) Industry publications External financial coverage Binary choice N Third party sources of funding. These sources include: (1) Contracted initial or extended equipment or component warranty programs. (2) Fleet financial protection (fleet casualty insurance) purchased to protect an agency against claims of bodily injury, property damage resulting from accidents, and against equipment losses due to fire, theft, vandalism, etc. (1) Agency and Fleet Policies (2) Procurement (3) Equipment specifications and contracts (4) State risk management Input Name Question Type Required Description Data Source Expected time to repair Sliding scale N Total time elapsed from repair first labor to close of repair work order. Note: some fleets calculate this value from the time the equipment is first declared down until close of the repair work order. (1) Commercial shop repair and maintenance guides (2) OEM repair guides (3) Fleet management system (4) Commercial repair shop estimate LTD cost of the equipment Numeric value N Total expenditures for a selected equipment item divided by the total miles or hours operated. All ownership, maintenance, and operating costs are aggregated for a particular unit and divided by the total miles or hours operated. (1) Fleet management system (2) Fleet and agency financial and accounting systems Planned cost for equipment in the same class at this age Numeric value N LTD equipment costs are compared to similar equipment items as defined by age, usage, make, etc. within the same equipment class. (1) Fleet information management system (2) OEM literature (3) Industry publications Table 4. (Continued).

46 Decision Making for Repair Versus Replacement of Highway Operations Equipment Repair within rebuild Sliding scale N A rebuild decision expands the scope of a repair. This question allows the user to indicate the extent to which a rebuild completes the repair. (1) Agency and fleet department policies (2) Customer or user department requirements (3) Agency established LOS Availability of alternate equipment Sliding scale N The sourcing of another similar equipment unit having similar vocational functionality and capabilities. The alternate equipment will substitute in the assignment of the downed equipment until rebuild has been completed. (1) Agency and fleet policies (2) Established utilization standards (3) Procurement office (4) Rental contracts (5) Intergovernmental agreements Rental cost rate: short-term rental of similar equipment Numeric value N The cost of renting equipment to fill an operational need for the duration of time required to rebuild a downed equipment item. The cost estimate should include all administrative and service charges, including pickup and delivery, insurance, fuel, mileage, charges for fair wear and tear, rental with or without operator, contract duration, etc. (1) State procurement office (2) Rental contracts (3) Fleet and agency policies (4) Intergovernmental agreements Input Name Question Type Required Description Data Source Environmental constraints Binary choice N Environmental constraints are any limitations on fleet strategy options because of social expectations; external competition; cultural, political, or economic factors; or technological or legal requirements. (1) EPA (2) Federal, state, city, county, and local environmental regulations (3) Agency and fleet policies (4) State risk management (5) State attorney general’s office Urgency – timeline Sliding scale N The criticality of need to return the downed equipment to service. Agency obligations dictate the speed by which the function of downed equipment must be met. (1) Agency and fleet department policies (2) Customer or user department requirements (3) Agency established LOS Rebuild option Binary choice Y Determination of whether the class of equipment in question allows for it to be rebuilt. Certain classes of equipment are generally not considered for a rebuild. (1) OEM repair guides (2) Industry publications (3) Commercial repair standards guide (e.g., MOTOR) Operating funds availability for rebuild Binary choice Y Availability of monies within the agency for the (relatively more expensive) rebuild of equipment. (1) Agency or department budgets (2) Rental cost funds (if rental charge-back fund system is in place Table 4. (Continued).

Data Preparation 47 Utilization (forecast) Sliding scale Y The expected future use of an equipment item, equipment type, or equipment class over a defined time period. This is especially useful when replacing high cost, unique equipment or when introducing new equipment into the fleet. (1) Fleet and agency policies (2) Agency 5- and 10-year plans (3) Established utilization standards (4) Fleet management system (5) Performance measures and benchmarking Capital funds availability Binary choice Y Monetary resources dedicated for the replacement of capital equipment and goods. (1) Agency budget director (2) Agency or fleet policies (3) Fleet charge-back system or enterprise fund Replacement cost Sliding scale N The future cost of acquiring an equipment item with similar functionality and capacity. (1) Procurement office (2) Industry publications (3) OEM and dealer networks Expected time to replace Sliding scale N The length of time required to obtain a replacement piece of equipment and put it into service. This is particularly important with highly specialized equipment items. (1) Procurement office (2) Industry publications (3) OEM and dealer networks Input Name Question Type Required Description Data Source Rental cost rate: unit rate charged for equipment in the class Numeric value N The unit rate for equipment in the same class should be comprised of all administrative and service charges, including pickup and delivery, insurance, fuel, mileage, charges for fair wear and tear, contract duration, etc. (1) State procurement office (2) Rental contracts (3) Fleet and agency policies (4) Intergovernmental agreements Utilization (historical) Sliding scale Y LTD utilization is captured from initial in-service date to present. The utilization rate for a particular equipment item is its actual frequency of use and duration of use. These measurements can be expressed as miles, hours, days, or trips, and can be benchmarked over a defined period, typically by month or quarter. (1) Fleet and agency policies (2) Fleet management system (3) Industry publications (4) Performance measurements and benchmarking Table 4. (Continued).

48 Once the user has identified all the data sources necessary for operation of the 4R Tool, the users can begin input and operation. This chapter describes in detail how to operate the 4R Tool; outlines its organization; and provides a step-by-step approach for data input, color scheme, structure, and navigation of the tool’s tabs and analysis results. 5.1 Getting Started This tool was developed for DOT staff who have basic familiarity with Excel and access to information about fleet equipment. The 4R Tool has user protections that prevent the over- riding of critical formulas. A basic Excel user should be able to easily navigate the various tabs of the tool, understand the outputs, and use filters to drill down into the details of the inputs and results tables. 5.2 Tool Organization The 4R Tool has two independent modules: (1) Decision Module and (2) Economic Analysis Module. Each is described briefly in this section. Decision Module The Decision Module includes three tabs for user inputs: (1) Initiation, (2a) Rebuild vs. Repair, and (2b) Replace vs. Retire. Each of the three tabs includes a questionnaire. The user always completes Initiation tab. Based on results of that set of questions, the user completes one of the other two tabs (but not both). For example, if the outcome of the Initiation tab is a score greater than 50, the user is prompted to advance to the (2a) Rebuild vs. Repair tab. There are three possible decision outcomes assessed as part of the questionnaires: (1) Repair, (2) Rebuild, and (3) Replace. If none of these three outcomes are satisfied, the 4R Tool rec- ommends a fourth outcome, (4) Retire. Figure 11 summarizes the decision tree logic of the 4R Tool. Economic Analysis Module The second module of the 4R Tool is the Economic Analysis Module. This module is fully contained in the Economic Analysis tab. Completing this step allows the user to compare future cost rates ($/h) for a repair, rebuild, or replace decision. Details on running this module can be found in Chapter 6. Running the 4R Tool Decision Module C H A P T E R   5

Running the 4R Tool Decision Module 49 5.3 Color Scheme To help users quickly identify input cells, the 4R Tool is formatted with different colors. Table 5 provides a description of all cell format types used in the 4R Tool. 5.4 Summary of Inputs The user of the tool works through a series of questions related to the cost, operational condi- tion, criticality, and external factors (e.g., DOT regulations, budgeting) for the equipment item in question. For each question, the user manipulates slider bars or manually enters numerical Figure 11. Decision tree outlining the structure of the 4R Tool. Formatting Color Purpose Description Numerical data entry (e.g., $10) Cells with light yellow fill require the user to input numerical data. Drop-down list (e.g., NOT AVAILABLE) Cells with darker yellow fill require the user to select from a drop-down menu. Slider bar (e.g., Very Easy) Cells with a light gray slider bar over yellow fill require the user to manipulate a slider across a range of values. Checkbox Cells with a light blue fill provide the user with the option to check variables they may wish to exclude. Examples Cells with a light green fill are examples of user inputs. Do not enter data into these cells. Auto-calculation results cell Cells with a gray fill are formulas that the 4R Tool uses to calculate results based on date entries in the Inputs tabs. Do not enter data into these cells. Table 5. Color scheme used in 4R Tool cells.

50 Decision Making for Repair Versus Replacement of Highway Operations Equipment information. As shown in Figure 12, users can adjust sliders by clicking on the arrows under- neath minimum and maximum values. Certain questions are best suited to numerical inputs. For questions such as equipment age (Figure 13), the user will be asked to provide a numeric value. The user can provide this informa- tion in the form of years, hours, or miles. The user can change the unit type by selecting from the drop-down menu located to the right of the numeric input. Using the Weights tab, the user is also able to assign a weighted value to each question, in order to customize the tool’s outputs to best match an agency’s unique situation. In the example shown in Figure 14, the user has reduced points assigned to repair cost, diminishing its impact on the decision outcome. 5.5 Summary of Outputs Based on assessment of the equipment’s status, the unique needs of the agency, and the user’s weighting of individual input questions, the 4R Tool provides the user with a recommended repair, rebuild, replace, or retire decision. Pressure gauge graphics (Figure 15) are included on the Initiation, Rebuild vs. Repair, and Replace vs. Retire tabs, which allow the user to track progress toward a particular outcome in real time. Figure 12. Example of a question with a slider input. Figure 13. Example of a question with a numeric input. Variable category Description of variable. See User Guide for more information. Check box if variable is not important. Repair Cost The cost of repairing the down equipment. 9% Use Slide to change the relative importance of the variable. Weight of 50 indicates an average level of importance compared to the other variables. Fractions indicate relative importance of each variable. Figure 14. Example weighting question with a slider input.

Running the 4R Tool Decision Module 51 After answering all the questions on the Initiation and either the Rebuild vs. Repair or Replace vs. Retire tabs, the 4R Tool presents a final score above the pressure gauge graphic. As shown in Figure 16, linked instruction boxes to the left and right of the final score direct the user to the appropriate follow-on step in the analysis. 5.6 Using the 4R Tool The following sections provide an overview of the organization and contents of each tab in the 4R Tool and include detailed instructions for inputting data, selecting assessment criteria, and interpreting output results. Tool Organization The 4R Tool is organized into eight tabs, as shown in Figure 17. Figure 15. Pressure gauge graphic included in the Initiation tab. Figure 16. Linked instruction boxes.

52 Decision Making for Repair Versus Replacement of Highway Operations Equipment The components of the Decision Module [noted as (2a), (2b), and (3)] and the Economic Analysis Module [noted as (5)] operate independently; each can function without completion of the other. The user should begin with the Intro tab and proceed through the tabs from left to right. Intro Tab The user will start here. This tab provides a brief walk-through of the tool’s purpose, structure, and results. This tab also contains the “map” with which to navigate the Decision Module tabs of the 4R Tool. The decision tree initiation point identifying the decision outcome, shown in Figure 18, is an automatically updated figure. As the user completes the questions in the Decision Module, either a checkmark or an “X” icon will appear between each decision point. Initiation Tab The Initiation tab is the first tab of the Decision Module. The purpose of this tab is to direct the user toward either the Repair vs. Rebuild tab or the Replace vs. Retire tab. The user will input the numeric and slider values for 11 questions. The Definitions tab provides detailed descriptions of all user input variables in the 4R Tool. As illustrated in Figure 19, the first four questions in the Initiation tab are the most impor- tant; these determine whether the score is above or below 50. Questions 5 through 11 are for Figure 17. The eight tabs of the 4R Tool. Figure 18. Icon identifying the decision outcome. Figure 19. Breakdown of input questions in the Initiation tab.

Running the 4R Tool Decision Module 53 fine-tuning the score toward 0 or toward 100, but do not affect the outcome from the responses to the first four questions. Figure 20 provides a quick example of the how the one of the first questions in the Initiation tab can affect next steps. If the user enters a value for “estimated cost of repairing the equipment” that exceeds the value for “repair cost limit,” the user will be directed the Replace vs. Retire tab, since no other input question overrides the importance of that one. Questions five through 11 provide additional supporting evidence that Rebuild vs. Repair is preferable to Replace vs. Retire (or vice versa). For example, if the user states that “external financial coverage is available,” this increases the relative score of a positive decision to Repair. After answering all of the questions in the Initiation tab, the user will be directed to the appro- priate follow-on tab, depending on the final score. If the final score is greater than 50, the user is directed to the Rebuild vs. Repair tab. If the score is less than 50, the user is directed to the Replace vs. Retire tab. The final score is presented in a conditionally formatted cell in the upper right corner of the sheet and in the pressure gauge graphic. It will appear green for scores above 50 and red for scores below 50. Linked text boxes on either side of the final score direct the user to the appropriate follow-on step in the analysis. In the example shown in Figure 21, the user received a score of 78.7 and was directed to the Rebuild vs. Repair tab. Rebuild vs. Repair Tab The user is directed to this tab if a score greater than 50 is received in the Initiation tab. If the score is less than 50 in the Initiation tab, a warning will appear at the top of the Rebuild vs. Repair tab, as shown in Figure 22. The purpose of this tab is to guide the user through the rebuild versus repair decision. The user will input numeric and slider values for five of eight listed input questions. Responses to three questions [(2) Equipment Age, (3) Condition, and (6) Urgency –Timeline] are automatically pulled in from the Initiation tab, as shown in Figure 23. $11,000 Dollars $10,000 Dollars 1.10 Ratio Enter the estimated cost of repairing the equipment Enter the repair cost limit Ratio of cost to limit (calculated) (1) Repair Cost Figure 20. By exceeding the repair cost limit, a Repair outcome is not possible. Figure 21. The final score cell and text boxes directing the user to the appropriate next step.

54 Decision Making for Repair Versus Replacement of Highway Operations Equipment As with the Initiation tab, the eight input questions fall into one of two groups: (1) those that affect the score and determine whether the right choice is to rebuild, or (2) fine-tuning input questions that provide additional support for either the rebuild or the repair outcome (Figure 24). After answering all of the questions in the Rebuild vs. Repair tab, a final score will appear over the pressure gauge graphic in the upper right corner. The tool will recommend a Rebuild deci- sion if the score is above 50 or a Repair decision if the score is below 50. In the example shown in Figure 25, the user received a score of 12.1 and will see a decision recommendation of Repair Figure 22. A warning will appear at the top of the tab if the user did not receive the necessary score in the preceding step of the analysis. Figure 23. Some input questions in the Rebuild vs. Repair tab are read from previous tabs. Figure 24. Breakdown of input questions in the Rebuild vs. Repair tab. Figure 25. The final score on the Rebuild vs. Repair tab, indicating a repair decision as the most appropriate outcome.

Running the 4R Tool Decision Module 55 on the Output tab. e closer this score is to 0 or 100, the stronger the recommendation. For example, a score of 90 indicates a very strong case for Rebuild. Replace vs. Retire Tab e user is directed to this tab if the score in the Initiation tab is less than 50. If the score in the Initiation tab is greater than 50, a warning will appear at the top of the tab as shown in Figure 22. e purpose of this tab is to guide the user through the replace versus retire decision. e user will input numeric and slider values for ve input questions. e ve input questions fall into one of two groups: (1) the input questions that dictate whether the right choice is to replace, or (2) the ne-tuning input questions that provide additional support for either the replace or the retire outcome (Figure 26). Aer answering all the questions in the Replace vs. Retire tab, a nal score will appear over the pressure gauge graphic in the upper right corner. e 4R Tool will recommend a Replace decision if the score is above 50 or a Retire decision if the score is below 50. Figure 27 shows the nal score box before the user adds any inputs. Weights Tab Advanced users can customize the 4R Tool to match the unique needs of their DOTs. As shown in Figure 28, users can use sliders to assign a value of 1 through 100 to each input question. Figure 26. Breakdown of input questions in the Replace vs. Retire tab. Figure 27. The score on the Replace vs. Retire tab.

56 Decision Making for Repair Versus Replacement of Highway Operations Equipment Conditionally formatted cells to the right show the user the relative weighting for each input question aer the slider has been adjusted. Adjustment of an input question’s weighting changes how the 4R Tool considers the input questions when calculating decision outcomes. For example, in Figure 28, repair cost will have a very minor eect on the outcome of the repair versus no repair decision; operating funds avail- ability will have a more signicant impact. Output Tab Aer completing the prompts in the Initiation tab and in either the Rebuild vs. Repair or Replace vs. Retire tab, a nal recommendation will appear on the Output tab, as shown in Figure 29. e pressure gauge graphics from the three analysis tabs are pulled into this tab to provide the user with a dashboard-style overview, as shown in Figure 30. Below the nal recommendation and pressure gauge graphics, there is also a summary display of the inputs that were completed by the user in the previous tabs. ese summary inputs will automatically populate based on the criteria selected by the user, as shown in Figure 31. Variable Exclude? Check box if variable is not important Raw Points Repair Rebuild Replace Repair Cost Age Condition Operating Funds Availability 10 70 50 100 10% 7% 14% 1% 8% 5% 11% Figure 28. Example of adjusted weighting sliders in the Weights tab. Figure 30. Pressure gauge graphics pulled into the Output tab. RepairBased on your inputs, therecommendation is to: Figure 29. Final recommendation in the Output tab.

Running the 4R Tool Decision Module 57 In addition, decision outcomes are illustrated in the decision tree figure in the Intro tab. A green checkmark or red X appears between decision points, depending on the on the outcome, as shown in Figure 32. Interpreting Results The final recommendation will be one of four possible outcomes: Repair, Rebuild, Replace, or Retire. The three pressure gauge graphics are repeated from earlier tabs to allow a side-by-side comparison. The 4R Tool’s confidence in a recommended outcome increases as the score deviates from the midpoint. For example, if the user achieves a score of 75 or greater in the Rebuild vs. Repair tab, the tool will be very confident that Rebuild is the most appropriate outcome, as shown in Figure 33. SUMMARY OF INPUTS Initiation Tab Repair Cost User Input Units Points Estimated repair cost Per hour Dollars 0 Repair cost limit Per hour Dollars Equipment Age Equipment age $0 More Info 5 Target replacement age $0 0 Condition Current condition of equipment Very Poor N/A 0 Operating funds available Availability of funds $0 N/A 0 Resale value Resale value Lower than typical N/A 0 Expected Time to Repair Very short N/A 0 Life-to-Date Cost History Life-to-date cost of equipment $0 0 0 Planned cost for equipment in class at this age $0 0 Repair History Relative number and magnitude of repairs Lower than typical N/A 0 External Financial Coverage (warranty or insurance) $0 N/A 0 Environmental Contraints $0 N/A 0 Urgency - Timeline Average N/A 0 Rebuild vs Repair Rebuild Option User Input Units Points Rebuild IS NOT N/A 0 Equipment Age Equipment age $0 0 0 Target replacement age $0 0 Condition Current condition of equipment Very Poor N/A 0 Figure 31. Summary of Decision Module tab inputs.

58 Decision Making for Repair Versus Replacement of Highway Operations Equipment Figure 32. Decision tree with decision outcome icons. Figure 33. The tool’s condence in a decision will increase as the score deviates from the midpoint.

Running the 4R Tool Decision Module 59 Each of the four potential outcomes require that different sets of conditions be met. A Repair outcome is achieved if the following two conditions are satisfied: • A score over 50 is achieved on the Initiation tab. • A score under 50 is achieved on the Rebuild vs. Repair tab. A Rebuild outcome is achieved if the following two conditions are satisfied: • A score over 50 is achieved on the Initiation tab. • A score over 50 is achieved on the Rebuild vs. Repair tab. A Replace outcome is achieved if the following two conditions are satisfied: • A score under 50 is achieved on the Initiation tab. • A score over 50 is achieved on the Replace vs. Retire tab. A Retire outcome is achieved if the following two conditions are satisfied: • A score under 50 is achieved on the Initiation tab. • A score under 50 is achieved on the Replace vs. Retire tab.

60 This module is housed in a single tab labeled Economic Analysis. This module estimates the cost rate ($/h or $/mile) of the repair, rebuild, and replace decisions going forward. It is intended for users familiar with LCCA. To obtain the cost rate, the user will need to provide values for the current equipment age, annual use going forward, current equipment value, and A and B coefficients describing the operating costs as the equipment ages, as shown in Figure 34. The A and B coefficients are the parameters of a life cycle cost curve (the second order polynomial) that describes the cumulative LTD operating costs for a piece of equipment. The A coefficient represents the linear portion of growth in costs over time and the B coeffi- cient represents how costs accumulate more quickly as the equipment ages. Additional informa- tion regarding the coefficients and methods to determine their values can be found in Mitchell et al. (2011). An explanation of how to calculate the A and B coefficient for use in the Economic Analysis Module can be found in the Guide (Part II). After providing the necessary input values, the user selects a depreciation method for each of the Repair, Rebuild, and Replace decisions, and inputs decision-specific criteria as shown in Figure 35. The user can select the depreciation method from a drop-down menu containing the options None, Straightline, Sum of Years’ Digits, and Declining Balance (Figure 36). Additionally, the user will need to provide the necessary parameters for the depreciation method selected. Each depreciation method is described briefly in this section. Straight Line With the straight line depreciation method, the value of a piece of equipment is reduced uni- formly over the depreciation period from its initial value to its salvage value. The necessary parameters are the depreciation term (in years) and the end or salvage value of the equipment. Sum of the Years’ Digits Sum of the years’ digits is an accelerated depreciation method. The necessary parameters are the depreciation term (in years) and the end or salvage value of the equipment. Declining Balance Declining balance is an accelerated depreciation system of recording larger depreciation expenses during the earlier years of an asset’s useful life and recording smaller depreciation expenses during the asset’s later years. Running the 4R Tool Economic Analysis Module C H A P T E R   6

Running the 4R Tool Economic Analysis Module 61 Figure 34. Required inputs for Economic Analysis Module. Box 2. Inputs and calculations below correspond to the respective outcome (e.g., Repair). Repair More Info Repair cost ($) $8,000 More Info Depreciation Method None More Info No Input Needed More Info No Input Needed More Info Rebuild More Info Rejuvenation (Age rewind in hours) 2,500 More Info Rebuild cost ($) $60,000 More Info Machine value after rebuild ($) $110,000 More Info Depreciation Method Straightline More Info Term (yrs) 3 More Info End Value 75,000$ More Info Replace More Info Purchase Price ($) $500,000 More Info Depreciation Method Declining Balance More Info Term (yrs) 5 More Info End Value 75,000$ More Info Figure 35. Repair, rebuild, and replace decision-specific inputs. Figure 36. Depreciation method drop-down menu.

62 Decision Making for Repair Versus Replacement of Highway Operations Equipment Depreciation under the declining balance method is calculated with the following formula: Declining Balance Depreciation CBV DR= × Where CBV = Current book value, and DR = Depreciation rate. The declining balance calculation does not consider the salvage value in the depreciation of each period. However, if the book value will fall below the salvage value, the last period might be adjusted so that it ends at the salvage value. The resulting model calculations will provide the user with an output of the estimated cost rate for each of the three decisions looking forward, as shown in Figure 37. A more detailed explanation of the Economic Analysis Module can be found in Chapter 9. The results of three sets of calculations (repair, rebuild and replace) are found in rows 36–46 of the economic analysis model, as shown in Figure 37. The information in the corresponding columns is used to populate the three graphs found at the bottom of the Economic Analysis tab. The first graph (Figure 38) expresses the comparison in terms of the calculated costs per hour to operate a unit under each of the options. In this graph, the calculation is expressed in terms of hours after the repair, rebuild, or replace decision is implemented. The second graph (Figure 39) expresses this same calculation as in Figure 38, except that the x-axis is identified in future years instead of hours. The Economic Analysis tab also includes a table at the bottom that shows the cost of choosing the alternatives in future years (Figure 40). Figure 37. Economic Analysis Module cost rate outputs for repair decision.

Running the 4R Tool Economic Analysis Module 63 $0 $20 $40 $60 $80 $100 $120 $140 0 5,000 10,000 15,000 20,000 25,000 To ta l C os t R at e ($ /h ) Age Going Forward (hours) Repair Rebuild Replace Figure 38. Total cost rate ($/h) output age in hours. $0 $20 $40 $60 $80 $100 $120 $140 0 2 4 6 8 10 12 To ta l C os t R at e ($ /h ) Age Going Forward (years) Repair Rebuild Replace Figure 39. Total cost rate output ($/h) in years.

64 Decision Making for Repair Versus Replacement of Highway Operations Equipment Summary Output Year Going Forward Rebuild instead of Repair Replace instead of Repair Rebuild instead of Replace 1 $0 -$2,000 $2,000 2 $0 -$4,000 $4,000 3 $0 -$6,000 $6,000 4 $0 -$8,000 $8,000 5 $0 -$10,000 $10,000 6 $0 -$12,000 $12,000 7 $0 -$14,000 $14,000 8 $0 -$16,000 $16,000 9 $0 -$18,000 $18,000 10 $0 -$20,000 $20,000 Cost of Choosing Figure 40. Cost of choosing alternatives.

65   The Output tab has been formatted so that the user can easily print out the results of the analysis for record keeping or distribution. To print, click on File > Print. Ensure that the Print Active Sheets option has been selected and that page has been set to Landscape Orientation as shown in Figure 41. The Output tab has been formatted so that it will automatically print to three sheets that are fit to the page. Figure 42, Figure 43, and Figure 44 illustrate what will be printed. Outputs and Printing C H A P T E R   7 Figure 41. Print setting options.

66 Decision Making for Repair Versus Replacement of Highway Operations Equipment Figure 42. Page 1 of printout: summary graphics in Output tab. Figure 43. Page 2 of printout: summary of inputs from the Initiation tab.

Outputs and Printing 67 Figure 44. Page 3 of printout: summary of inputs from the Rebuild vs. Repair and Replace vs. Retire tabs.

68 This chapter describes the inputs and outputs of nine case examples using the 4R Tool Deci- sion Module. Table 6 summarizes these examples, including a description of the example, the equipment type, and the recommended outcome. Detailed descriptions of the examples are described in this chapter. Each detailed description includes a short narrative, screenshots of the inputs, and recommendations. Use Case Examples of Decision Module C H A P T E R   8 Description Equipment Type Recommendation 1. New equipment with minor damage. Pickup: 3/4 ton, 4x2 Repair 2. Old equipment with major damage or major component failure. Snowplow truck: 6x4, 10 cubic yards (CY) Retire 3. Mid-life equipment with significant damage or major component failure. Articulated loader: 4x4, 5 CY Rebuild 4. Failure of critical equipment needed for upcoming seasonal work. Snowplow truck: 4x4, 5 CY Replace 5. External insurance claim with possible third-party liability recovery that delays decision. Highway paint truck: 6x4, interstate Retire 6. Highly critical equipment with major damage but difficult parts availability and a long lead time to repair, rebuild, replace, or retire. Truck mounted snow blower Replace 7. Major equipment component failure caused by DOT operator misuse or abuse. Highway mowing tractor Retire 8. Equipment vandalism. Motor grader: 6x6 Repair 9. Old equipment with major damage or component failure. Repair, rebuild, replace, or retire funding is available. Supply chain delays and resultant constrained OEM manufacturing capabilities dictate dealer reluctance to accept new orders; the OEM order bank backlogs create delivery times that are excessively long and uncertain. Snowplow truck: 6x4, 10 CY Replace Table 6. Summary table of nine use case examples of using the 4R Tool.

Use Case Examples of Decision Module 69 8.1 Example 1: New Equipment with Minor Damage Narrative: A 3/4 ton pickup truck sustained minor to moderate right front fender and mirror damage when the operator lost control of the unit on ice. The equipment struck roadside bushes. The assigned operator was performing routine highway winter inspections when the incident occurred. Summary information is as follows: • Equipment type: Pickup – 4x2, 3/4 ton • Acquisition cost: $29,950.00 • Replacement cost: $35,500 • Assignment status: Active • Equipment class count: 382 The user entries for this item in the Initiation tab are shown in Figure 45; entries in the Rebuild vs. Repair tab are shown in Figure 46. Recommendation: Based on user inputs, the fleet manager should repair the equipment.

Figure 45. Example 1—Initiation tab user entries.

Repair vs. Rebuild Score A higher score indicates Rebuild is a better option Points (1) Rebuild Option 3 Rebuild IS an option for equipment in this class. 10.5 Score (2) Equipment Age (read from Repair tab) 0 Enter the age of the equipment 2 Years Enter the target replacement age (or service or economic life) for the equipment. 10 Years Ratio of age to replacement age 0.20 (3) Condition (read from Repair tab) 3 Raw Weighted (4) Operating Funds Availability for Rebuild 3 0.0 10.5 Operating funds ARE AVAILABLE to cover the cost of REBUILD. 1 1 199.0 188.5 (5) Repair within Rebuild 0 Portion of the needed repair that would be within a rebuild None All (6) Urgency - Timeline (read from Repair tab) 3 (7) Availability of Alternate Equipment 5 The ease with which alternate equipment with similar functionality and capability can be obtained is: Very Easy Average Very Difficult (8) Rental Cost Rate 5 35.00$ per Hour 50.00$ per Hour 0.7 Enter the cost rate for which similar equipment is available for short term rental. Enter the unit rate charged for equipment in the same class. Instructions: Adjust values in yellow input cells. For detailed explanations of each input, refer to User's Guide. If score is less than 50, the recommended decision is to Repair If score is more than 50, the recommended decision is to Rebuild 10.5 0 25 50 75 100 Figure 46. Example 1—Rebuild vs. Repair tab user entries.

72 Decision Making for Repair Versus Replacement of Highway Operations Equipment 8.2 Example 2: Old Equipment with Major Damage or Major Component Failure Narrative: A 6x4, 10 CY snowplow truck failed its annual inspection due to a cracked frame. The frame failure was caused by advanced corrosion. The truck is an active unit assigned to winter maintenance operations. The month is May. Summary information is as follows: • Equipment type: Snowplow truck – 6x4, 10 CY • Estimated equipment repair cost: $58,225 • Age: 15 years • Condition: Fair • Replacement criteria: 12 years or 350,000 miles • Expected time to repair: Above average • Expected time to replace: Above average for equipment class • Repair history and cost: Average for age and use • Internal funds available to repair: Yes • Internal funds available to replace: Yes • Current utilization: Less than average • Future utilization: Less than average • External financial coverage (warranty or insurance) available to repair: No • Internal or external constraints related to environmental considerations: None • Urgency to return the unit back to service: Seasonal need; above average • Temporary replacement unit available (in-house or commercial): Yes • Acquisition cost: $164,000 • Replacement cost: $286,500 • Mileage: 364,651 • Assignment status: Active • Estimated resale value: $4,800 • Equipment class count: 511 The user entries for this item in the Initiation tab are shown in Figure 47; entries in the Replace vs. Retire tab are shown in Figure 48. Recommendation: Based on user inputs, the fleet manager should retire the equipment.

Initiation Score A higher score indicates Repair is a better option 2.9 Points Score Check box to exclude variable User Inputs Units More Info Example 0 $58,225 Dollars More Info $1,000 $16,400 Dollars More Info $10,000 User Inputs Units Example 0 15.0 Years 1.5 12.0 Years 10.0 0 Very Poor Average Very Good 2 Operating funds ARE AVAILABLE to cover the cost of needed repairs. 5 Lower than typical Average Higher than typical 0 Very short Average Very long User Inputs Units Example 1 $11.83 per mile $5.00 $9.57 per mile $10.00 0 Lower than typical Typical Higher than typical 0 External financial coverage ARE NOT AVAILABLE 2 Environmental contraints DO NOT DICTATE 1 Very low Average Very high Instructions: For each of the 11 questions below, adjust values in pale and dark yellow input cells. For detailed explanations of each input, refer to User's Guide. Enter the estimated cost of repairing the equipment (See more info here) Enter the repair cost limit (1) Repair Cost (2) Equipment Age Enter the age of the equipment (value rounds to nearest tenth decimal point) Enter the target replacement age (or service or economic life) for the equipment. (4) Operating Funds Availability (3) Condition Assess the current condition of the down equipment relative to similarly-aged equipment in the class. Do not factor in the current problem for the current failure. to cover the cost of needed repairs. Enter the current life-to-date cost of the equipment Assessment of the history of repairs for the equipment considering the number of workorders, frequency, magnitude and LTD repair costs Urgency - is the criticality of need, the capacity and/or functionality of the down equipment to be returned to service: (7) Life-to-Date Cost History (5) Resale Value (6) Expected Time to Repair (8) Repair History (10) Environmental Contraints (11) Urgency - Timeline (9) External Financial Coverage (warranty or insurance) replacement of the down equipment Enter the planned cost for equipment in the class at this age The value expected to be realized from resale of the down equipment in its current state is: Time required to repair the down equipment and return to service 2.9 If Score is less than 50, go to 2b Replace vs Retire tab. If Score is more than 50, go to 2a Rebuild vs Repair tab. No Repair Repair Figure 47. Example 2—Initiation tab user entries.

Figure 48. Example 2—Replace vs. Retire tab user entries.

Use Case Examples of Decision Module 75 8.3 Example 3: Midlife Equipment with Significant Damage or Major Component Failure Narrative: The operator of this loader mistakenly filled the hydraulic system with diesel fuel and proceeded to work the piece of equipment to load gravel until the item failed. The hydraulic system and all ancillary components failed due to contaminated hydraulic system lubricant, requiring a complete rebuilding of the system. Summary Information is as follows: • Equipment type: Articulated loader – 4x4, 5 CY • Estimated equipment repair cost: $38,960 • Repair cost limit: $55,400 • Age: 9 years • Condition: Good • Replacement criteria: 12 Years or 10,000 hours • Expected time to repair: Above average • Expected time to replace: Average for equipment class • Repair history and cost: Above average for age and use • Internal funds available to repair: Yes • Internal funds available to replace: Yes • External financial coverage (warranty or insurance) available to repair: No • Internal or external constraints related to environmental considerations: No • Urgency to return the unit back to service: Seasonal need; above average • Temporary replacement unit available (in-house or commercial): Yes • Acquisition cost: $176,800 • Replacement cost: $244,500 • Hours: 7,322 • Assignment status: Active • Estimated resale value: $66,300 • Equipment class count: 98 • LTD cost of the equipment: $29.88 per hour • Planned cost for equipment in the class at this age: $37.33 per hour • External unit cost rate for which similar equipment is available for short term rental: $50.00 per day • Internal unit rate charged for equipment in the same class: $35.00 per day The user entries for this item in the Initiation tab are shown in Figure 49; entries in the Repair vs. Rebuild tab are shown in Figure 50. Recommendation: Based on user inputs, the fleet manager should rebuild the equipment.

Initiation Score A higher score indicates Repair is a better option 72.2 Points Score Check box to exclude variable User Inputs Units More Info Example 4 $38,960 Dollars More Info $1,000 $55,500 Dollars More Info $10,000 User Inputs Units Example 4 9.0 Years 1.5 12.0 Years 10.0 5 Very Poor Average Very Good 2 Operating funds ARE AVAILABLE to cover the cost of needed repairs. 2 Lower than typical Average Higher than typical 0 Very short Average Very long User Inputs Units Example 5 $29.88 per hour $5.00 $37.33 per hour $10.00 1 Lower than typical Typical Higher than typical 0 External financial coverage ARE NOT AVAILABLE 2 Environmental contraints DO NOT DICTATE 0 Very low Average Very high Instructions: For each of the 11 questions below, adjust values in pale and dark yellow input cells. For detailed explanations of each input, refer to User's Guide. Enter the estimated cost of repairing the equipment (See more info here) Enter the repair cost limit (1) Repair Cost (2) Equipment Age Enter the age of the equipment (value rounds to nearest tenth decimal point) Enter the target replacement age (or service or economic life) for the equipment. (4) Operating Funds Availability (3) Condition Assess the current condition of the down equipment relative to similarly-aged equipment in the class. Do not factor in the current problem for the current failure. to cover the cost of needed repairs. Enter the current life-to-date cost of the equipment Assessment of the history of repairs for the equipment considering the number of workorders, frequency, magnitude and LTD repair costs Urgency - is the criticality of need, the capacity and/or functionality of the down equipment to be returned to service: (7) Life-to-Date Cost History (5) Resale Value (6) Expected Time to Repair (8) Repair History (10) Environmental Contraints (11) Urgency - Timeline (9) External Financial Coverage (warranty or insurance) replacement of the down equipment Enter the planned cost for equipment in the class at this age The value expected to be realized from resale of the down equipment in its current state is: Time required to repair the down equipment and return to service 72.2 If Score is less than 50, go to 2b Replace vs Retire tab. If Score is more than 50, go to 2a Rebuild vs Repair tab. No Repair Repair Figure 49. Example 3—Initiation tab user entries.

Repair vs. Rebuild Score A higher score indicates Rebuild is a better option Points Check box to exclude variable (1) Rebuild Option 2 Rebuild IS an option for equipment in this class. 71.0 Score (2) Equipment Age (read from Initiation tab) User Inputs Units Example 4 Enter the age of the equipment 9 Years 8,000 Enter the target replacement age (or service or economic life) for the equipment. 12 Years 10,000 Ratio of age to replacement age 0 75 Do no update Start 0 (3) Condition (read from Initiation tab) 5 (4) Operating Funds Availability for Rebuild 2 Operating funds ARE AVAILABLE to cover the cost of REBUILD. (5) Repair within Rebuild 4 Portion of the needed repair that would be within a rebuild None All (6) Urgency - Timeline (read from Initiation tab) 0 (7) Availability of Alternate Equipment 2 The ease with which alternate equipment with similar functionality and capability can be obtained is: Very Easy Average Very Difficult (8) Rental Cost Rate User Inputs Units Example 0 $50.0 per Day $35 $35.0 per Day $50 Enter the external unit cost rate for which similar equipment is available for short term rental. Instructions: Adjust values in pale and dark yellow input cells. For detailed explanations of each input, refer to User's Enter the internal unit rate charged for equipment in the same class. If score is less than 50, the recommended decision is to Repair If score is more than 50, the recommended decision is to Rebuild 71.0 0 25 50 75 100 Repair Rebuild Figure 50. Example 3—Rebuild vs. Repair tab user entries.

78 Decision Making for Repair Versus Replacement of Highway Operations Equipment 8.4 Example 4: Failure of Critical Equipment Needed for Upcoming Seasonal Work Narrative: This single-axle truck is utilized on a narrow, mountainous, two-lane state highway that is notorious for its hairpin turns. The 37-mile-long state route connects a highly popular ski venue to a heavily traveled interstate highway. A highway closure assures high political and media scrutiny. The equipment (which has been parked at a remote location since the prior season) needs major engine, cab, and chassis electrical system repairs due to rodent infestation prior to its upcoming seasonal deployment. The balance of the DOT snowplow fleet is comprised of tandem axle and tri-axle trucks of 10 to 12 CY. Summary information is as follows: • Equipment Type: Snowplow truck – 4x4, 5 CY • Month: October • Temporary replacement unit available (in-house or commercial): None • Acquisition cost: $153,143 • Replacement cost: $224,880 • Miles: 188,453 • Assignment status: Active • Estimated resale value: $36,970 • Equipment class count: 4 The user entries for this item in the Initiation tab are shown in Figure 51; entries in the Replace vs. Retire tab are shown in Figure 52. Recommendation: Based on user inputs, the fleet manager should replace the equipment.

Use Case Examples of Decision Module 79 Repair vs. No Repair Score A higher score indicates Repair is a better option 15.1 Points Score 4 $36,750 Dollars $42,656 Dollars 0.86 Ratio 4 Raw Weighted 8 Hours Start 0 15.1 15.1 12 Hours 25 1 1 0.67 Ratio 25 183.9 183.9 4 25 25 Very Poor Average Very Good End 100 0 Operating funds ARE NOT AVAILABLE to cover the cost of needed repairs. 3 Lower than typical Average Higher than typical 1 Very short Average Very long 2 37.48$ per mile 33.67$ per mile 1.11 1 Lower than typical Typical Higher than typical 0 External financial coverage ARE NOT AVAILABLE 3 Environmental contraints DO NOT DICTATE 0 Very low Average Very high Instructions: Adjust values in yellow input cells. For detailed explanations of each input, refer to User's Guide. Enter the estimated cost of repairing the equipment Enter the repair cost limit Ratio of cost to limit (calculated) (2) Equipment Age Enter the age of the equipment Enter the target replacement age (or service or economic life) for the equipment. Ratio of age to replacement age (calculated) (4) Operating Funds Availability (3) Condition Assess the current condition of the down equipment relative to similarly-aged equipment in the class. Do not factor in the current problem for the current failure. (1) Repair Cost The value expected to be realized from resale of the down equipment in its current state is: Time required to repair the down equipment and return to service Enter the current life-to-date cost of the equipment Enter the planned cost for equipment in the class at this age Ratio of acutal to planned cost replacement of the down equipment to cover the cost of needed repairs. Assessment of the history of repairs for the equipment considering the number of workorders, frequency, magnitude and LTD repair costs Urgency - is the criticality of need, the capacity and/or functionality of the down equipment to be returned to service: (10) Environmental Contraints (11) Urgency - Timeline (5) Resale Value (6) Expected Time to Repair (7) Life-to-Date Cost History (8) Repair History (9) External Financial Coverage (warranty or insurance) 15.1 0 25 50 75 100 If Score is less than 50, go to Replace tab. than 50, go to Rebuild tab. If Score is more Figure 51. Example 4—Initiation tab user entries.

Replace vs. Retire Score A higher score indicates Replace is a better option than Retire Points (1) Utilization - Historical 2 62.8 Utilization of the down equipment item over the past few years has been: Raw Weighted Lower than typical Typical Higher than typical Start 0 62.8 62.8 25 1 1 25 136.2 136.2 (2) Utilization - Forecast 2 25 Utilization of a replacement equipment is expected over the next few years to be: 25 Lower than typical Typical Higher than typical End 100 (3) Capital Funds Availabilty 3 Captial funds ARE AVAILABLE to REPLACE the equipment. (4) Replacement Cost 3 The cost of acquiring an equipment item with similar functionality and capacity is: Lower than planned Planned Higher than planned (5) Expected Time to Replace 2 The time required to acquire an equipment item with similar functionality and capacity is: Very Short Average Very Long Instructions: Adjust values in yellow input cells. For detailed explanations of each input, refer to User's Guide. 62.8 If score is less than 50, the recommended decision is to Retire If score is more than 50, the recommended decision is to Replace 0 25 50 75 100 Figure 52. Example 4—Replace vs. Retire tab user entries.

Use Case Examples of Decision Module 81 8.5 Example 5: External Insurance Claim with Possible Third Party Liability Recovery that Delays Decision Narrative: This equipment has been involved in a moderately serious incident. Law enforce- ment has deemed that the operator of the commercial truck involved was at fault. The third party liability claim for repair and associated costs is being handled by state risk management and lingers without closure. However, the end of highway striping season ends in early October, and the agency is greatly behind in completing this extremely important highway maintenance activity prior to the onset of cold weather. Assigned operating crew, support crew, and equipment have been reassigned to lesser duties. Summary information is as follows: • Equipment Type: Interstate highway paint truck, 6x4 • Month: August • Temporary replacement unit available (in-house or commercial): None • Acquisition cost: $550,570 • Replacement cost: $683,622 • Miles: 176,441 • Assignment status: Active • Equipment class count: 8 The user entries for this item in the Initiation tab are shown in Figure 53; entries in the Replace vs. Retire tab are shown in Figure 54. Recommendation: Based on user inputs, the fleet manager should retire the equipment.

82 Decision Making for Repair Versus Replacement of Highway Operations Equipment Repair vs. No Repair Score A higher score indicates Repair is a better option 27.0 Points Score 2 $128,440 Dollars $120,000 Dollars 1.07 Ratio 5 Raw Weighted 5 Years Start 0 27.0 27.0 10 Years 25 1 1 0.45 Ratio 25 172.0 172.0 4 25 25 Very Poor Average Very Good End 100 3 Operating funds ARE AVAILABLE to cover the cost of needed repairs. 3 Lower than typical Average Higher than typical 1 Very short Average Very long 4 43.67$ per hour 44.83$ per hour 0.97 3 Lower than typical Typical Higher than typical 5 External financial coverage ARE AVAILABLE 3 Environmental contraints DO NOT DICTATE 0 Very low Average Very high Instructions: Adjust values in yellow input cells. For detailed explanations of each input, refer to User's Guide. Enter the estimated cost of repairing the equipment Enter the repair cost limit Ratio of cost to limit (calculated) (2) Equipment Age Enter the age of the equipment Enter the target replacement age (or service or economic life) for the equipment. Ratio of age to replacement age (calculated) (4) Operating Funds Availability (3) Condition Assess the current condition of the down equipment relative to similarly-aged equipment in the class. Do not factor in the current problem for the current failure. (1) Repair Cost The value expected to be realized from resale of the down equipment in its current state is: Time required to repair the down equipment and return to service Enter the current life-to-date cost of the equipment Enter the planned cost for equipment in the class at this age Ratio of acutal to planned cost replacement of the down equipment to cover the cost of needed repairs. Assessment of the history of repairs for the equipment considering the number of workorders, frequency, magnitude and LTD repair costs Urgency - is the criticality of need, the capacity and/or functionality of the down equipment to be returned to service: (10) Environmental Contraints (11) Urgency - Timeline (5) Resale Value (6) Expected Time to Repair (7) Life-to-Date Cost History (8) Repair History (9) External Financial Coverage (warranty or insurance) 27.0 0 25 5 75 100 If Score is less than 50, go to Replace tab. than 50, go to Rebuild tab. If Score is more Figure 53. Example 5—Initiation tab user entries.

Replace vs. Retire Score A higher score indicates Replace is a better option than Retire Points (1) Utilization - Historical 4 4.5 Utilization of the down equipment item over the past few years has been: Raw Weighted Lower than typical Typical Higher than typical Start 0 10.3 4.5 25 1 1 25 188.7 194.5 (2) Utilization - Forecast 4 25 Utilization of a replacement equipment is expected over the next few years to be: 25 Lower than typical Typical Higher than typical End 100 (3) Capital Funds Availabilty 0 Captial funds ARE NOT AVAILABLE to REPLACE the equipment. (4) Replacement Cost 0 The cost of acquiring an equipment item with similar functionality and capacity is: Lower than planned Planned Higher than planned (5) Expected Time to Replace 1 The time required to acquire an equipment item with similar functionality and capacity is: Very Short Average Very Long Instructions: Adjust values in yellow input cells. For detailed explanations of each input, refer to User's Guide. 4.5 If score is less than 50, the recommended decision is to Retire If score is more than 50, the recommended decision is to Replace 0 25 50 75 100 Figure 54. Example 5—Replace vs. Retire tab user entries.

84 Decision Making for Repair Versus Replacement of Highway Operations Equipment 8.6 Example 6: Highly Critical Equipment with Major Damage but Difficult Parts Availability and a Long Lead Time to Repair, Rebuild, Replace, or Retire Narrative: This equipment is assigned to a major DOT-operated airport and has been involved in a serious incident with a commercial aircraft during the season’s first major winter event. The DOT operator was deemed to be at fault. However, the piece of equipment is one of three critical snow removal vehicles assigned to this busy, high elevation airport. The equipment item is 26 years old; the specialized repair parts will be difficult to source because the OEM is no longer in production. The repair lead time required will extend well beyond the current winter snow season. The lead time to replace is also more than 18 months. Summary information is as follows: • Equipment type: Truck mounted snow blower • Month: November • Temporary replacement unit available (in-house or commercial): None • Acquisition cost: $244,870 • Replacement cost: $743,885 • Hours: 8,828 • Assignment status: Active • Equipment class count: 10 The user entries for this item in the Initiation tab are shown in Figure 55; entries in the Replace vs. Retire tab are shown in Figure 56. Recommendation: Based on user inputs, the fleet manager should replace the equipment.

Use Case Examples of Decision Module 85 Repair vs. No Repair Score A higher score indicates Repair is a better option -0.7 Points Score 0 $91,480 Dollars $14,800 Dollars 6.18 Ratio 0 Raw Weighted 23 Years Start 0 -0.7 -0.7 15 Years 25 1 1 1.53 Ratio 25 199.7 199.7 1 25 25 Very Poor Average Very Good End 100 3 Operating funds ARE AVAILABLE to cover the cost of needed repairs. 3 Lower than typical Average Higher than typical 0 Very short Average Very long 0 143.11$ per hour 107.29$ per hour 1.33 0 Lower than typical Typical Higher than typical 0 External financial coverage ARE NOT AVAILABLE 3 Environmental contraints DO NOT DICTATE 0 Very low Average Very high (5) Resale Value (6) Expected Time to Repair (7) Life-to-Date Cost History (8) Repair History (9) External Financial Coverage (warranty or insurance) replacement of the down equipment to cover the cost of needed repairs. Assessment of the history of repairs for the equipment considering the number of workorders, frequency, magnitude and LTD repair costs Urgency - is the criticality of need, the capacity and/or functionality of the down equipment to be returned to service: (10) Environmental Contraints (11) Urgency - Timeline (1) Repair Cost The value expected to be realized from resale of the down equipment in its current state is: Time required to repair the down equipment and return to service Enter the current life-to-date cost of the equipment Enter the planned cost for equipment in the class at this age Ratio of acutal to planned cost Instructions: Adjust values in yellow input cells. For detailed explanations of each input, refer to User's Guide. Enter the estimated cost of repairing the equipment Enter the repair cost limit Ratio of cost to limit (calculated) (2) Equipment Age Enter the age of the equipment Enter the target replacement age (or service or economic life) for the equipment. Ratio of age to replacement age (calculated) (4) Operating Funds Availability (3) Condition Assess the current condition of the down equipment relative to similarly-aged equipment in the class. Do not factor in the current problem for the current failure. -0.7 0 25 50 75 100 If Score is less than 50, go to Replace tab. If Score is more than 50, go to Rebuild tab. Figure 55. Example 6—Initiation tab user entries.

Replace vs. Retire Score A higher score indicates Replace is a better option than Retire Points (1) Utilization - Historical 2 53.3 Utilization of the down equipment item over the past few years has been: Raw Weighted Lower than typical Typical Higher than typical Start 0 53.3 53.3 25 1 1 25 145.7 145.7 (2) Utilization - Forecast 4 25 Utilization of a replacement equipment is expected over the next few years to be: 25 Lower than typical Typical Higher than typical End 100 (3) Capital Funds Availabilty 3 Captial funds ARE AVAILABLE to REPLACE the equipment. (4) Replacement Cost 0 The cost of acquiring an equipment item with similar functionality and capacity is: Lower than planned Planned Higher than planned (5) Expected Time to Replace 0 The time required to acquire an equipment item with similar functionality and capacity is: Very Short Average Very Long Instructions: Adjust values in yellow input cells. For detailed explanations of each input, refer to User's Guide. 53.3 If score is less than 50, the recommended decision is to Retire If score is more than 50, the recommended decision is to Replace 0 25 50 75 100 Figure 56. Example 6—Replace vs. Retire tab user entries.

Use Case Examples of Decision Module 87 8.7 Example 7: Major Equipment Component Failure Caused by DOT Operator Misuse or Abuse Narrative: The month is May. It is the first highway mowing program of the season. The DOT operator ignored low coolant gauges and audible alarms and continued to run the tractor to failure. The operator stated that they thought the low coolant shutdown system would initiate and auto- matically shut down the equipment when it got hot enough. Unfortunately, the tractor was not equipped with this protective option because of its age. Summary information is as follows: • Equipment type: Mowing tractor • Estimated equipment repair cost: $17,373 • Repair limit: $7,200 • Age: 13 years • Condition: Good • Replacement criteria: 12 years or 8,500 hours • Expected time to repair: Above average • Expected time to replace: Average for equipment class • Current utilization: Less than average • Estimated future utilization: Average • Repair history and cost: Average for age and use • Internal funds available to repair: Yes • Internal funds available to replace: Yes • External financial coverage (warranty or insurance) available to repair: No • Internal or external constraints related to environmental considerations: None • Urgency to return the unit back to service: Seasonal need; above average • Temporary replacement unit available (in-house or commercial): Yes • Acquisition cost: $48,650 • Replacement cost: $92,125 • Hours: 6,716 • Assignment status: Active • Estimated resale value: $7,860 • Equipment class count: 43 The user entries for this item in the Initiation tab are shown in Figure 57; entries in the Replace vs. Retire tab are shown in Figure 58. Recommendation: Based on user inputs, the fleet manager should retire the equipment.

Initiation Score A higher score indicates Repair is a better option 15.0 Points Score Check box to exclude variable User Inputs Units More Info Example 0 $17,373 Dollars More Info $1,000 $7,200 Dollars More Info $10,000 User Inputs Units Example 1 13.0 Years 1.5 12.0 Years 10.0 2 Very Poor Average Very Good 2 Operating funds ARE AVAILABLE to cover the cost of needed repairs. 2 Lower than typical Average Higher than typical 2 Very short Average Very long User Inputs Units Example 4 $44.83 per hour $5.00 $47.27 per hour $10.00 2 Lower than typical Typical Higher than typical 0 External financial coverage ARE NOT AVAILABLE 2 Environmental contraints DO NOT DICTATE 2 Very low Average Very high Instructions: For each of the 11 questions below, adjust values in pale and dark yellow input cells. For detailed explanations of each input, refer to User's Guide. Enter the estimated cost of repairing the equipment (See more info here) Enter the repair cost limit (1) Repair Cost (2) Equipment Age Enter the age of the equipment (value rounds to nearest tenth decimal point) Enter the target replacement age (or service or economic life) for the equipment. (4) Operating Funds Availability (3) Condition Assess the current condition of the down equipment relative to similarly-aged equipment in the class. Do not factor in the current problem for the current failure. to cover the cost of needed repairs. Enter the current life-to-date cost of the equipment Assessment of the history of repairs for the equipment considering the number of workorders, frequency, magnitude and LTD repair costs Urgency - is the criticality of need, the capacity and/or functionality of the down equipment to be returned to service: (7) Life-to-Date Cost History (5) Resale Value (6) Expected Time to Repair (8) Repair History (10) Environmental Contraints (11) Urgency - Timeline (9) External Financial Coverage (warranty or insurance) replacement of the down equipment Enter the planned cost for equipment in the class at this age The value expected to be realized from resale of the down equipment in its current state is: Time required to repair the down equipment and return to service 15.0 If Score is less than 50, go to 2b Replace vs Retire tab. If Score is more than 50, go to 2a Rebuild vs Repair tab. No Repair Repair Figure 57. Example 7—Initiation tab user entries.

Replace vs. Retire Score A higher score indicates Replace is a better option than Retire Points Check box to exclude variable (1) Utilization - Historical 0 Utilization of the down equipment item over the past few years has been: 9.5 Lower than typical Typical Higher than typical (2) Utilization - Forecast 2 Utilization of a replacement equipment is expected over the next few years to be: Lower than typical Typical Higher than typical (3) Capital Funds Availabilty 2 Captial funds ARE AVAILABLE to REPLACE the equipment. (4) Replacement Cost 2 The cost of acquiring an equipment item with similar functionality and capacity is: Lower than planned Planned Higher than planned (5) Expected Time to Replace 2 The time required to acquire an equipment item with similar functionality and capacity is: Very Short Average Very Long Instructions: Adjust values in yellow input cells. For detailed explanations of each input, refer to User's Guide. If score is less than 50, the recommended decision is to Retire If score is more than 50, the recommended decision is to Replace 9.5 0 25 50 75 100 Retire Replace Figure 58. Example 7—Replace vs. Retire tab user entries.

90 Decision Making for Repair Versus Replacement of Highway Operations Equipment 8.8 Example 8: Equipment Vandalism Narrative: The month is September. This equipment was parked along a state highway in a remote section of the state during Labor Day weekend. The equipment was left on site to remove mud, rock, and debris accumulations from the highway resulting from anticipated heavy rain events. When crews returned to the piece of equipment on the first business day after the holiday, it was determined that the motor grader had sustained serious vandalism damage caused by rifle shots. The most serious damage was sustained by the cab, fluid tanks, and the engine compart- ment. The motor grader was assigned to the district and was equipped with a right-hand wing plow and deep “V” front plow to provide winter maintenance from late October to the end of April. Summary information is as follows: • Equipment type: Motor grader • Estimated equipment repair cost: $52,650 • Estimated repair limit: $78,500 • Age: 8 years • Condition: Good • Replacement criteria: 12 years or 10,000 hours • Expected time to repair: Above average • Expected time to replace: Average for equipment class • Repair history and cost: Less than average for age and use • Internal funds available to repair: Yes • Internal funds available to replace: Yes • External financial coverage (warranty or insurance) available to repair: No • Internal or external constraints related to environmental considerations: None • Rebuild option for this equipment class or repair cause: No • Urgency to return the unit back to service: Seasonal need; above average • Temporary replacement unit available (in-house or commercial): Yes • Acquisition cost: $341,000 • Replacement cost: $477,800 • Hours: 4,616 • Assignment status: Active • Estimated resale value: $153,800 (repaired) • Equipment class count: 34 • External unit cost rate for which similar equipment is available for short term rental: $78.00 per day • Internal unit rate charged for equipment in the same class: $55.00 per day The user entries for this item in the Initiation tab are shown in Figure 59; entries in the Repair vs. Rebuild tab are shown in Figure 60. Recommendation: Based on user inputs, the fleet manager should repair the equipment.

Initiation Score A higher score indicates Repair is a better option 69.5 Points Score Check box to exclude variable User Inputs Units More Info Example 5 $52,650 Dollars More Info $1,000 $78,500 Dollars More Info $10,000 User Inputs Units Example 4 8.0 Years 1.5 12.0 Years 10.0 4 Very Poor Average Very Good 2 Operating funds ARE AVAILABLE to cover the cost of needed repairs. 1 Lower than typical Average Higher than typical 0 Very short Average Very long User Inputs Units Example 2 $46.96 per hour $5.00 $41.74 per hour $10.00 4 Lower than typical Typical Higher than typical 0 External financial coverage ARE NOT AVAILABLE 2 Environmental contraints DO NOT DICTATE 0 Very low Average Very high Instructions: For each of the 11 questions below, adjust values in pale and dark yellow input cells. For detailed explanations of each input, refer to User's Guide. Enter the estimated cost of repairing the equipment (See more info here) Enter the repair cost limit (1) Repair Cost (2) Equipment Age Enter the age of the equipment (value rounds to nearest tenth decimal point) Enter the target replacement age (or service or economic life) for the equipment. (4) Operating Funds Availability (3) Condition Assess the current condition of the down equipment relative to similarly-aged equipment in the class. Do not factor in the current problem for the current failure. to cover the cost of needed repairs. Enter the current life-to-date cost of the equipment Assessment of the history of repairs for the equipment considering the number of workorders, frequency, magnitude and LTD repair costs Urgency - is the criticality of need, the capacity and/or functionality of the down equipment to be returned to service: (7) Life-to-Date Cost History (5) Resale Value (6) Expected Time to Repair (8) Repair History (10) Environmental Contraints (11) Urgency - Timeline (9) External Financial Coverage (warranty or insurance) replacement of the down equipment Enter the planned cost for equipment in the class at this age The value expected to be realized from resale of the down equipment in its current state is: Time required to repair the down equipment and return to service 69.5 If Score is less than 50, go to 2b Replace vs Retire tab. than 50, go to 2a Rebuild vs Repair tab. No Repair Repair If Score is more Figure 59. Example 8—Initiation tab user entries.

Repair vs. Rebuild Score A higher score indicates Rebuild is a better option Points Check box to exclude variable (1) Rebuild Option 0 Rebuild IS NOT an option for equipment in this class. 2.2 Score (2) Equipment Age (read from Initiation tab) User Inputs Units Example 4 Enter the age of the equipment 8 Years 8,000 Enter the target replacement age (or service or economic life) for the equipment. 12 Years 10,000 Ratio of age to replacement age 0 67 Do no update Start 0 (3) Condition (read from Initiation tab) 4 (4) Operating Funds Availability for Rebuild 2 Operating funds ARE AVAILABLE to cover the cost of REBUILD. (5) Repair within Rebuild 0 Portion of the needed repair that would be within a rebuild None All (6) Urgency - Timeline (read from Initiation tab) 0 (7) Availability of Alternate Equipment 2 The ease with which alternate equipment with similar functionality and capability can be obtained is: Very Easy Average Very Difficult (8) Rental Cost Rate User Inputs Units Example 0 $78.0 per Day $35 $55.0 per Day $50 Enter the external unit cost rate for which similar equipment is available for short term rental. Instructions: Adjust values in pale and dark yellow input cells. For detailed explanations of each input, refer to User's Enter the internal unit rate charged for equipment in the same class. If score is less than 50, the recommended decision is to Repair If score is more than 50, the recommended decision is to Rebuild 2.2 0 25 50 75 100 Repair Rebuild Figure 60. Example 8—Rebuild vs. Repair tab user entries.

Use Case Examples of Decision Module 93 8.9 Example 9: Old Equipment with Major Damage or Component Failure Narrative: Repair, rebuild, replace, or retire funding is available. Supply chain delays and resul- tant constrained OEM manufacturing capabilities dictate dealer reluctance to accept new orders, and the OEM order bank backlogs create delivery times that are excessively long and uncertain. Many DOT fleets are in the unusual situation of having plenty of capital funds with which to buy equipment, but they are unable to acquire equipment due to ongoing supply chain constraints and delays. This situation places automakers in a position in which the acceptance of orders and the timely delivery of finished products is at best uncertain. The extended timeline is characterized from the initial decision point to replace a unit with a new snowplow truck to having that unit ready to put into service. The result is that a lot of decisions to repair are being made for this as well as other equipment classes that would otherwise be decisions to replace. Summary information is as follows: • Equipment Type: Snowplow Truck – 6x4, 10 CY estimated • Repair cost: $46,338 • Repair limit: $8,600 • Age: 15 years • Condition: Poor • Replacement criteria: 12 years or 350,000 miles • Expected time to repair: High • Expected time to replace: Significantly above average for equipment class • Repair history and cost: Higher than average for age and use • Internal funds available to repair: Yes • Internal funds available to replace: Yes • External financial coverage (warranty or insurance) available to repair: No • Internal or external constraints related to environmental considerations: None • Urgency to return the unit back to service: Seasonal need; high • Temporary replacement unit available (in-house or commercial): No • Acquisition cost: $164,000 • Replacement cost: $294,600 • Mileage: 332,882 • Assignment status: Active • Estimated resale value: $6,800 • Equipment class count: 274 The user entries for this item in the Initiation tab are shown in Figure 61; entries in the Replace vs. Retire tab are shown in Figure 62. Recommendation: Based on user inputs, the fleet manager should replace the equipment.

Figure 61. Example 9—Initiation tab user entries.

Figure 62. Example 9—Replace vs. Retire tab user entries.

96 This chapter describes the inputs and outputs of an example scenario for the 4R Tool Eco- nomic Analysis Module. Narrative: A DOT must determine whether it makes economic sense to repair, rebuild, or replace a unit. The unit is question is a seven-year-old single-axle dump truck with 7,000 hours of total use. The replacement cost for this unit is $150,000; the DOT has a class replacement standard of 10 years or 10,000 hours for this equipment. According to the replacement standard, this unit would normally be operated for an addi- tional three years or 3,000 hours before being disposed. This unit has an estimated market value of $43,000 in its pre-repair condition. The DOT averages $25,000 from the sale of these units when they are replaced at the 10-year or 10,000 hours replacement standard. The estimated cost for performing the required repair is $10,000. With this repair, the unit would be expected to continue to operate with normal maintenance and repair costs until it reached its replacement period. However, this repair will not affect its pre-repair market value. For an investment of $20,000 ($10,000 more that the minimal repair), the effective age of the unit would be reduced by two years, allowing the unit to be operated for two years beyond the normal replacement period for this unit. However, the immediate post-repair value of this unit would only increase by $7,000. The end-of-service value would be unchanged when compared to a unit sold at the class replacement standard. Summary information is as follows: • Equipment type: Single-axle dump truck • Current age: 7,000 hours • Annual use going forward: 1,000 hours • Current equipment value: $43,000 • Equipment value at planned replacement age: $25,000 • Repair cost: $10,000 • Rebuild cost: $20,000 • Repair operational term: Three years • Rebuild operational Term: Five years 9.1 Additional Input Variables Needed Additional inputs needed to use the economic analysis model include the following: • Identify the depreciation method (straight line, sum of the years digits or declining balance) and period for amortizing the capital costs of the asset. The economic analysis model supports Use Case Example of Economic Analysis Module C H A P T E R   9

Use Case Example of Economic Analysis Module 97 three of the common depreciation methods, including an option for not using depreciation. However, selecting None results in no depreciation being calculated, with the unit value being fixed over the planning period. Logically, the same depreciation method should be used for all calculations (repair, rebuild, and replace). • Using maintenance cost and usage data, the user needs to calculate the A and B coefficients that describe the rate of change of maintenance costs, expressed in terms of cost per hour (or mile). The A coefficient reflects the fact that the cumulative cost of repairs grows, in part, in direct proportion to the hours worked by the equipment. The B coefficient reflects the fact that cumulative repair costs also accrue more quickly as the piece of equipment increases in age. Costs associated with maintenance and actions that prevent equipment failures contribute to the A coefficient; repair actions resulting from failures contribute to the B coefficient. The process for calculating the A and B coefficients is described in Part II, Chapter 6 of this report. Real-world operational data were obtained for vehicles similar in type and operation to the piece of equipment in this example for calculation of the A and B coefficients, as shown in Table 7. Historical data points for similar vehicles in this class are plotted using Excel and show the accumulated average repair cost by year (age) and hours of vehicle operation. A trendline was fit to the data using a second order polynomial equation in Excel, as shown in Figure 63. Excel displays the trendline formula and R-squared value for the dataset, as repeated in the following formula: 0.0006x 1.0854x2y = + In this formula, the A coefficient is 1.0854; the B coefficient is 0.0006. This information is input into the Economic Analysis Module as shown in the next section. Class Type Age Record Count Total Repair Costs Total Labor, Fringe, etc. Total Miles Total Hours PM and Repair Costs Miles Hours HD TRUCK - SINGLE AXLE 1 72 48,708 62,340 807,702 54,347 1,542$ 11,218 755 HD TRUCK - SINGLE AXLE 2 51 45,550 70,413 659,543 45,524 3,816$ 24,150 1,647 HD TRUCK - SINGLE AXLE 3 48 67,111 66,414 599,006 41,064 6,598$ 36,630 2,503 HD TRUCK - SINGLE AXLE 4 54 122,303 104,810 648,856 42,850 10,804$ 48,645 3,296 HD TRUCK - SINGLE AXLE 5 55 127,739 99,988 660,933 43,315 14,944$ 60,662 4,084 HD TRUCK - SINGLE AXLE 6 201 372,304 384,086 1,991,575 138,665 18,707$ 70,571 4,774 HD TRUCK - SINGLE AXLE 7 272 584,639 523,318 2,945,498 185,009 22,781$ 81,400 5,454 HD TRUCK - SINGLE AXLE 8 275 781,173 661,422 3,255,608 210,273 28,026$ 93,238 6,219 HD TRUCK - SINGLE AXLE 9 281 1,022,581 739,788 3,155,387 203,523 34,298$ 104,467 6,943 HD TRUCK - SINGLE AXLE 10 437 1,854,716 1,212,280 3,909,450 271,110 41,317$ 113,414 7,563 HD TRUCK - SINGLE AXLE 11 310 1,232,517 889,713 2,777,118 193,416 48,162$ 122,372 8,187 HD TRUCK - SINGLE AXLE 12 264 917,103 719,328 2,361,297 162,639 54,361$ 131,316 8,803 HD TRUCK - SINGLE AXLE 13 247 870,322 662,919 2,038,459 140,416 60,569$ 139,569 9,372 HD TRUCK - SINGLE AXLE 14 235 734,513 643,333 1,829,853 144,827 67,828$ 147,356 9,988 HD TRUCK - SINGLE AXLE 15 76 195,892 194,322 572,013 40,459 75,388$ 154,882 10,520 HD TRUCK - SINGLE AXLE 16 39 89,456 89,678 267,056 19,208 83,239$ 161,730 11,013 Accumulated Avg Cst_Usage Table 7. Example LTD operational cost and age for similar equipment.

98 Decision Making for Repair Versus Replacement of Highway Operations Equipment 9.2 Inputting Data Summary data were inserted into the Economic Analysis Module in Box 1 and Box 2 to determine the cost rate for each of the three decision options. Figures 64–70 display the data that were entered into the Economic Analysis Module for each section of the workbook and the outputs that were obtained through operation of the model. Recommendation (interpreting results): In this example, all of the calculations and sup- porting graphs show that repair is the lowest-cost option up until 8,000 hours or eight years. Rebuild becomes a slightly more cost-effective option than repair after the eight years or 8,000-hour point. However, this is well beyond the typical replacement criteria for this class. Replace is never the most cost-effective option within this scenario. This could be inter- preted as the class replacement guideline as being too low (at least from an economic perspec- tive). However, that position would ignore the potential that the existing guidelines reflect other fleet priorities, such as corrosion damage or vehicle availability. y = 0.0006x2 + 1.0854x R² = 0.9994 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 - 2,000 4,000 6,000 8,000 10,000 12,000 O pe ra tio na l C os t Hours Cost/Hour Figure 63. Trendline curve for LTD operational cost and age in hours. Variable Value Unit 7,000 Hours 1,000 Hours 43,000$ Dollars 1.0854 Unitless 0.0006 Unitless 8,876 2,000 250,000 2.0000 0.0050 Current age Annual use going forward Current equipment value Example Inputs Box 1. Inputs below are required for all outcomes (Repair, Rebuild, and Replace). See the User Guide for definitions of A coefficient and B coefficients. A coefficient B coefficient Figure 64. Example of user entries common to all decisions.

Use Case Example of Economic Analysis Module 99 Box 2. Inputs and calculations below correspond to the respective outcome (e.g., Repair). Repair Repair cost ($) $10,000 Depreciation Method Declining Balance Term (yrs) 3 End Value 25,000$ Straightline Term (yrs) 5 End Value $ 15,000 Sum of Years' Digits Term (yrs) 7 End Value $ 15,000 Declining Balance Term (yrs) 5 End Value $ 15,000 Year Going Forward Age Going Forward Effective Age Buy Operate Sell Cost Rate 0 0 7,000 $43,000 $0 $43,000 1 1,000 8,000 $10,085 $35,905 $17 2 2,000 9,000 $21,371 $29,981 $17 3 3,000 10,000 $33,856 $25,034 $17 4 4,000 11,000 $47,542 $25,034 $16 5 5,000 12,000 $62,427 $25,034 $16 6 6,000 13,000 $78,512 $25,034 $16 7 7,000 14,000 $95,798 $25,034 $16 8 8,000 15,000 $114,283 $25,034 $17 9 9,000 16,000 $133,969 $25,034 $17 10 10,000 17,000 $154,854 $25,034 $17 Example Inputs for Depreciation Method Figure 65. Example of user entries and outputs for repair decision.

100 Decision Making for Repair Versus Replacement of Highway Operations Equipment Rebuild Rejuvenation (Age rewind in hours) 2,000 Rebuild cost ($) $20,000 Machine value after rebuild ($) $50,000 Depreciation Method Declining Balance Term (yrs) 5 End Value 25,000$ Straightline Term (yrs) 5 End Value $ 15,000 Sum of Years' Digits Term (yrs) 7 End Value $ 15,000 Declining Balance Term (yrs) 5 End Value $ 15,000 Age Going Forward Effective Age Buy Operate Sell Cost Rate 0 5,000 $63,000 $0 $50,000 1,000 6,000 $7,685 $43,550 $27 2,000 7,000 $16,571 $37,932 $21 3,000 8,000 $26,656 $33,039 $19 4,000 9,000 $37,942 $28,777 $18 5,000 10,000 $50,427 $25,065 $18 6,000 11,000 $64,112 $25,065 $17 7,000 12,000 $78,998 $25,065 $17 8,000 13,000 $95,083 $25,065 $17 9,000 14,000 $112,369 $25,065 $17 10,000 15,000 $130,854 $25,065 $17 Example Inputs for Depreciation Method Figure 66. Example of user entries and outputs for rebuild decision.

Use Case Example of Economic Analysis Module 101 Replace Purchase Price ($) $150,000 Depreciation Method Declining Balance Term (yrs) 10 End Value 25,000$ Straightline Term (yrs) 5 End Value $ 15,000 Sum of Years' Digits Term (yrs) 7 End Value $ 15,000 Declining Balance Term (yrs) 5 End Value $ 15,000 Age Going Forward Effective Age Buy Operate Sell Cost Rate 0 0 $150,000 $0 $150,000 1,000 1,000 $1,685 $125,400 $26 2,000 2,000 $4,571 $104,834 $25 3,000 3,000 $8,656 $87,642 $24 4,000 4,000 $13,942 $73,268 $23 5,000 5,000 $20,427 $61,252 $22 6,000 6,000 $28,112 $51,207 $21 7,000 7,000 $36,998 $42,809 $21 8,000 8,000 $47,083 $35,788 $20 9,000 9,000 $58,369 $29,919 $20 10,000 10,000 $70,854 $25,012 $20 Example Inputs for Depreciation Method Figure 67. Example of user entries and outputs for replace decision.

102 Decision Making for Repair Versus Replacement of Highway Operations Equipment To ta l C os t R at e ($ /h o r $ /m i) Age Going Forward Figure 68. Comparison of calculated total cost rate in hours ($/h) to operate a unit under each of the options. To ta l C os t R at e ($ /h o r $ /m i) Age Going Forward Figure 69. Comparison of calculated total cost rate in years ($/h) to operate a unit under each of the options.

Use Case Example of Economic Analysis Module 103 Figure 70. Cost over time of choosing various alternatives. 9.3 Notes on Economic Analysis Module Example This is a hypothetical scenario to demonstrate how to use the Economic Analysis Module. Changing any of the various model inputs will result in a corresponding change in the analysis. However, the values used were selected to be reflective of a common DOT situation: that a purely economically based replacement decision often suggests that a DOT continue to operate units well beyond the period when these vehicles can provide reliable service. Driving these results is the low ending value of the unit, the associated high level of market value loss, and the relatively low levels of usage. Under this scenario, there are not enough hours accumulated quickly enough to allow the increased trend of maintenance, repair, and fuel costs to overcome the loss of asset value. In effect, this model is suggesting that this item should be held and operated (nearly) indefinitely, as it does not consider noneconomic factors. The described situation supports the need for DOT fleet managers to look holistically at the 4R Tool and its recommended actions.

104 This chapter discusses four key visualizations associated with the 4R Tool. 10.1 Summary of Scores The purpose of the pressure gauge visualizations is to help users understand the strength of a recommended outcome. The distance of the needle from the midpoint into a green or red category illustrates whether the decision was obvious (far from the midpoint) or a very close call (close to the midpoint). The pressure gauge visualizations (Figure 71) are useful as a communications tool for fleet managers or other DOT personnel who are trying to determine whether to repair, rebuild, replace, or retire a piece of equipment and whether to give the decision outcome a closer examination or to pursue the outcome because it is the clear winner. 10.2 Assessing Economic Impact: Economic Analysis Visualization The Economic Analysis tab helps users to assess a decision’s impact on the adjusted total cost rate into the future. This analysis allows a user to compare the adjusted total cost rate by equip- ment age for a repair, rebuild, or replace decision. The Economic Analysis tab chart (Figure 72) is useful for communicating to audiences how a particular decision will affect the adjusted total cost rate of the piece of equipment in the future. 10.3 Simple Decision Tree The decision tree (Figure 73) describes the path taken by the user through the different phases of the Decision Module. As the user enters information into the Decision Module, an X or a checkmark will indicate the recommended decision path. Users can save this figure to graphi- cally document the path taken for a certain piece of equipment. 10.4 Detailed Decision Tree The detailed decision tree shown in Figure 74 does not appear in the 4R Tool. This figure is useful for illustrating the structure of the Decision Module in the 4R Tool. Figure 74 can be used as a handout to highlight both the decision-making process and the types of data that went into arriving at the outcome. Communications Guide C H A P T E R   1 0

Communications Guide 105 Figure 71. Pressure gauge graphics. To ta l C os t R at e Age Going Forward (years) Figure 72. Economic analysis visualization—adjusted total cost rate by equipment age.

106 Decision Making for Repair Versus Replacement of Highway Operations Equipment Figure 73. 4R Tool decision tree.

Communications Guide 107 Must Be Met for Repair Fine Tuning Factors Must Be Met for Rebuild Fine Tuning Factors Must Be Met for Replace Fine Tuning Factors Figure 74. Detailed decision tree.

108 References Drinkwater, R. W., and N. A. J. Hastings. 1967. “An Economic Replacement Model.” Operational Research Society, Vol. 18, No. 2, pp. 121–138. Gransberg, D. 2015. Major Equipment Life-cycle Cost Analysis. Minnesota Department of Transportation, St. Paul, MN. Hamilton, R. 2018. NCHRP Research Report 879: Optimal Replacement Cycles of Highway Operations Equipment. Transportation Research Board, Washington, DC. Lauria, P. and D. Lauria. 2014. NCHRP Synthesis 452: State Department of Transportation Fleet Replacement Management Practices. TRB, National Research Council, Washington, DC. MacAllister. 2017. Is it Better to Repair, Rebuild or Replace Heavy Equipment? https://www.macallister.com/ is-it-better-to-repair-rebuild-or-replace-heavy-equipment/. Accessed March 18, 2021. Mitchell, Z. 1998. A Statistical Analysis of Construction Equipment Repair Costs Using Field Data & the Cumulative Cost Model. Virginia Polytechnic Institute and State University, Blacksburg, VA. Mitchell, Z., J. Hildreth, and M. Vorster. 2011. “Using the Cumulative Cost Model to Forecast Equipment Repair Cost: Two Different Methodologies.” Journal of Construction Engineering and Management, Vol. 137, No. 10, pp. 817–822. NAVFAC. 2003. Management of Civil Engineering Support Equipment. Naval Facilities Engineering Systems Command. U.S. Navy, Washington, DC. Terborgh, G. 1949. Dynamic Equipment Policy. McGraw Hill, New York, NY. U.S. Department of the Army. 2020. Management, Acquisition, and Use of Motor Vehicles. Department of the Army, Washington, DC. U.S. Fish and Wildlife Service. 2015. Heavy Equipment Utilization and Replacement Handbook. U.S. Fish and Wildlife Service, Washington, DC. Vorster, M. C. 2009. Construction Equipment Economics. Pen Publications, Christiansburg, VA.

109   A P P E N D I X A Survey Questions 1. Please indicate your name, title, and agency (e.g., _____ State DOT) a. Name b. Title c. Agency 2. What is the approximate number of owned or managed equipment units (i.e., number of on-road and off-road vehicles and major equipment assets greater than $5K in value) within your agency fleet? a. Less than 1,000 b. 1,000 – 2,500 c. 2,501 – 5,000 d. More than 5,000 3. Does your agency have a formal repair vs. replace decision process for equipment? a. No b. Yes, it is mostly qualitative (e.g., based upon prior experience or expert judgment) c. Yes, it is mostly quantitative (e.g., data driven or financially determined) d. Yes, it’s a mix of qualitative and quantitative 4. Does your agency use a decision support system (DSS), including any software or algorithms, to help make repair vs. replace decisions? a. No b. Yes (please explain and use specific software names if applicable) 5. Which staff have responsibility for making repair vs. replace decisions? a. Staff at agency central headquarters b. Staff at the region or division level c. Staff at the shop level d. It depends, or some combination of the above (please explain) 6. Do repair vs. replace decisions need to be justified to others (e.g., executive staff, regional leadership, etc.)? a. No b. Yes (please provide details) c. It depends (please explain)

110 Decision Making for Repair Versus Replacement of Highway Operations Equipment c. Budget constraints d. Warranty status e. Repair frequency f. Agency policies g. Future fleet needs h. Age of equipment i. Historical utilization j. Down time considerations k. Economic parameters, such as resale value or operations and maintenance costs l. Physical condition of equipment m. Environmental considerations n. Other factors (indicate factor) 9. Please provide any additional information on how your agency makes repair vs. replace decisions for its equipment. 10. If you have a recommendation for a contact or contacts we should speak to that would provide valuable input to this research (either internal or external to your agency), please provide their contact info below. 7. Is your repair vs. replace decision process consistent across all vehicle classes and makes, operating units, functional uses, etc.? a. Yes b. No (please explain) 8. Which of the following factors most influence your repair vs. replace decision process? (check the top five factors that you consider most influential) a. Mission criticality of the equipment b. Availability of replacement equipment and parts

111   A P P E N D I X B Survey Results Responses to content-focused survey questions are provided below. Questions to gather contact information (Q1 and Q10) have not been included. Q2. What is the approximate number of owned or managed equipment units (i.e., number of on-road and off-road vehicles and major equipment assets greater than $5K in value) within your agency fleet?

112 Decision Making for Repair Versus Replacement of Highway Operations Equipment Q4. Does your agency use a decision support system (DSS), including any software or algorithms, to help make repair vs. replace decisions? Q3. Does your agency have a formal repair vs. replace decision process for equipment?

Survey Results 113 Q6. Do repair vs. replace decisions need to be justified to others (e.g., executive staff, regional leadership, etc.)? Q5. Which staff have responsibility for making repair vs. replace decisions?

114 Decision Making for Repair Versus Replacement of Highway Operations Equipment Q7. Is your repair vs. replace decision process consistent across all vehicle classes and makes, operating units, functional uses, etc.?

Survey Results 115 Q8. Which of the following factors most influence your repair vs. replace decision process? (check the top five factors that you consider most influential)

116 Decision Making for Repair Versus Replacement of Highway Operations Equipment Q9. Please provide any additional information on how your agency makes repair vs. replace decisions for its equipment. Response We base our replacement decisions on a 10-point system that is comprised of miles 60% and age 40%. Once a vehicle reaches the 10-points then it is eligible for replacement. Then budget and utilization come into play. LIFE CYCLE DRIVES MOST REVOLVING FLEET REPLACEMENTS. OCCASIONALLY UNDER- UTILIZATION OR EXTRAORDINARY DAMAGE MIGHT INFLUENCE DECISION. REPLACEMENT OF NON-REVOLVING FUND ASSETS DEPEND ON NEED AND BUDGET. Replacement budget constraints and criticality of the equipment play a major role in being forced to continue to repair old and obsolete equipment. Repair cost, equipment condition/age is compared with current replacement schedules. There is a dichotomy in the process for decision making that relies on empirical data (cost, ROI, historical expense) and the expertise of knowing if a piece of equipment is in a state in which repair will extend its useful life to the point where it would make sense mission-wise and financially. Repair vs. replacement situations tend to rise as capital funding isn’t able to keep fleet assets within established life cycles. Major breakdowns then place Operations in a situation of having to spend good money on bad iron in order to keep the vehicle operational. Nevada has no written policy for repair vs. replace. There is a replacement policy where certain criteria must be met before replacement, but since there isn’t budget enough to replace all equipment that meets the criteria, the decision needs to be made which vehicles or equipment types need replacement the most. The ones that don’t get replaced, are repaired until such time as it’s deemed not cost-effective to continue repairs. Repair/replacement decisions are unfortunately largely placed on availability of equipment contracts. While we would rather sell equipment at its peak used value at auction, we are often forced to have equipment in our fleet accumulate extensive mileage & usage. This drives many decisions to repair equipment that would otherwise be retired from the fleet to continue operational efficiency. Typically, budget is the biggest constraint. 2019 we did not buy any new equipment due to budget restrictions, which translated into keeping some equipment that we would have disposed of and replaced. Developing a life cycle replacement tool. All equipment has a turn-in criteria that is based on age/mileage/hours of use. Some use more than of these criteria some use age only.

Survey Results 117 Response Total Cost of Ownership is the driving factor. Our agency is mandated to spend 80% of our capital replacement on snowplow equipment. With what is left we based the decision on if we can rent the equipment. If we can it becomes a lower priority. We are currently in process of changing our equipment asset replacement to a life cycle based. With the intention to cycle assets through the fleet at timeline that will be before any major repair issues. Also, hoping to receive improve surplus sales proceeds, selling our equipment earlier in the life cycle.

118 A P P E N D I X C Interview Guide The following questions were used to guide discussions in interviews with fleet managers. Background Information 1. Interviewee name and organization. 2. What is the approximate number of owned or managed equipment units (i.e., number of on-road and off-road vehicles and major equipment assets greater than $5K in value) within your fleet? Inputs 1. What data/information do you use in making repair v. replace decisions? 2. Where does the data come from (is it systematically stored, individually generated for each decision)? 3. What considerations constrain the decisions – or what considerations force an outcome? 4. What information/data would you like to have available when making the decisions? Process 1. Please describe the process used to make repair v. replace decisions. 2. Does your fleet use any software or algorithms to help making decisions? If yes, please describe. a. Does the software or algorithm you use meet your needs for making Repair, Rebuild, Replace, or Retire decisions? Did you have to customize an off-the-shelf product? Does the software or algorithm fall short? 3. Does your agency used performance metrics when making repair v. replace decision? a. If yes, how did your fleet establish the performance metrics? What have you found to be the benefits or drawbacks of using these metrics? 4. Under what circumstances is the process not strictly applied? 5. Who makes the decisions? Are they reviewed/approved? By whom? 6. What analysis is performed to support the decision? 7. How would you improve the process? 8. Does your fleet have any examples or case studies of challenging repair v. repair decisions? If yes, please describe.

Interview Guide 119 Outputs 1. How are repair v. replace decisions documented/archived? What have your found to be the benefits or drawbacks of this approach? 2. Are decisions subject to audit? 3. What format would be best for capturing the process and outcome for the decisions? 4. What information would be most helpful to you for us to include in the guide or tool?

120 Annotated Bibliography A P P E N D I X D The research team’s review of literature began with a high-level scan of more than 40 resources. The search for information covered a range of areas: academia and journals; government guidebooks and handbooks; industry association reports and blog articles; and conference presentations. This initial list was culled, yielding 20 resources determined to be the most applicable for this research. The most applicable resources are noted below, with relevant takeaways comprising their summaries. Drinkwater, R.W., and N.A.J. Hastings. 1967. “An Economic Replacement Model.” Operational Research Society, Vol. 18, No. 2, pp. 121–138. A study of economic replacement by application of a repair limit criterion. The repair limit is the maximum value of a repair that will be undertaken, the alternative to which is replacement of the asset. Drinkwater and Hastings developed optimum repair limits and demonstrated their value using data from a fleet of non-armored British Army equipment. The method for determining the repair limit is based on future marginal cost. For a repaired piece of equipment, the future marginal cost is the cost of the repair [r] plus the expected future costs [m(t)] divided by the expected remaining life [g(t)]: This future marginal cost of the repaired equipment is compared to the expected marginal cost of a similar replacement equipment. This expected marginal cost can be taken as the rate charged for assets in the class, or the calculated rate for replacement with a dissimilar asset. Taking the rate charged for assets in the class as V, then the decision is to repair when: The critical case that sets the repair limit occurs when: where r0(t) is the repair limit at time t. The repair limit is then:

Annotated Bibliography 121 Hastings, N. A. J. 1969. “The Repair Limit Replacement Method.” Operational Research Society, Vol. 20, No. 3, pp. 337–349. Dynamic programming methods are applied to develop optimum repair limits under two situations: (1) where equipment condition is purely related to age, and (2) where equipment condition is related to the number of previous repairs. The impacts of finite and infinite planning horizons and discounted and undiscounted costs are also discussed. Beichelt, F. 1982. “A Replacement Policy Based on Limits for the Repair Cost Rate.” IEEE Transactions on Reliability, Vol. R-31, No. 4, pp. 401–403. The author notes that common replacement policy is based on economic lifetime defined by the minimum long-run total cost rate. The traditional repair limit replacement policy provides for consideration of individual repair costs but has the disadvantage of depending only on the cost of a single repair. Thus, repeated small repairs may create a desire for replacement that is never satisfied due to the small cost of each individual small repair. A replacement policy based on actual average repair cost rate is proposed and compared with the economic lifetime policy. Park, K. 1983. “Cost Limit Replacement Policy Under Minimal Repair.” Microelectronics Reliability, Vol. 23, No. 2, pp. 347–349. Based on the repair limit replacement policy, the author develops an optimal repair cost limit for minimal repairs that return the asset to an average condition for its age. The optimal repair cost limit is developed using a time to failure variable that follows a Weibull distribution and a repair cost variable that follows a negative exponential distribution. Chung, K., and S. Lin. 1996. “A Simple Procedure to Compute the Optimal Repair Cost Limit Under Minimal Repair.” The International Journal of Quality & Reliability Management, Vol. 13, Vol. 4, pp. 77–84. Based on the repair limit replacement policy, the authors develop optimal repair cost limits using a time to failure variable that follows a Weibull distribution and a repair cost variable that follows an exponential distribution. Mitchell, Z. 1998. A Statistical Analysis of Construction Equipment Repair Costs Using Field Data & the Cumulative Cost Model. Virginia Polytechnic Institute and State University, Blacksburg, VA. A presentation of research to determine the appropriate mathematical form for modeling the cumulative cost of repair parts and labor for heavy equipment. The determined second order polynomial is useful to develop life cycle cost models for equipment used to estimate economic life. The model is also useful in developing cost plans and annual budgets for repair costs. This is the primary repair limit applicable where the previous policy is group replacement. Once a repair limit policy is applied, then the repair limit is slightly altered but developed from the same conceptual foundation. Through simulation based on cost and repair data from a fleet of non-armored British Army equipment, the authors show that a repair limit replacement policy provides for a lower cost rate (cost per vehicle year) than group replacement at economic life.

122 Decision Making for Repair Versus Replacement of Highway Operations Equipment Beichelt, Frank. 2001. “A Replacement Policy Based on Limiting the Cumulative Maintenance Cost.” International Journal of Quality & Reliability Management, Vol. 18, No. 1, pp. 76–83. This proposes a replacement policy based on cumulative repair cost limit. It is demonstrated that the proposed model is an improvement on the economic lifetime approach in terms of long run total maintenance cost rate. A benefit of the proposed model is availability of maintenance cost data and lack of need for lifetime data. NAVFAC. 2003. Management of Civil Engineering Support Equipment. Naval Facilities Engineering Systems Command. U.S. Navy, Washington, DC. Appendix F of this references addresses replacement and repair data. It specifically provides data for determining the one-time repair cost limit for vehicles and equipment. The repair limit is set in terms of percentage of original procurement cost and is dependent upon the current age of the asset and the expected life of the asset. The repair limit varies from 75 percent of procurement cost at an age of one year to 20 percent at an age equal to the expected life. It is emphasized that the repair limit is the maximum total repair cost. Total repair cost is noted to include direct labor, material, indirect costs, and other direct charges. Gillespie, J., and A. Hyde. 2004. The Replace/Repair Decision for Heavy Equipment. Virginia Transportation Research Council, Charlottesville, VA. Although the title of this report focuses on the repair/replace decision, the research is focused on modeling life cycle costs for equipment. The authors provide an accurate and thorough review of life cycle cost principles and the application to identify an economically optimum age for replacement. The stated purpose of the research was to “determine whether a better, statistically based method for making replace/repair decisions could be identified.” Using data maintained in the Equipment Management System (EMS) by VDOT, several models were evaluated for predicting the sum of labor and parts expense year-to-date per dollar of fuel expense year-to-date one or more years in advance. A log-log model was found to best fit the data. Chang, C., S. Shey-Huei, and Y-L. Chen. 2010. “Optimal Number of Minimal Repairs Before Replacement Based on a Cumulative Repair-Cost Limit Policy.” Computers & Industrial Engineering, Vol. 59, No. 4, pp. 603–610. This proposes a replacement model conceptualized from the cumulative repair cost limit, with the addition of a maximum number of repairs when the cumulative repair cost limit is not met or exceeded. The objective of the research was to determine this optimal number of repairs before replacement that minimizes the cost rate. Gage, M. 2013. Equipment Maintenance and Replacement: Decision Making Processes. California Polytechnic State University, San Luis Obispo, CA. This report discusses reliability centered maintenance (RCM), which focuses on maintenance for reliability rather than liability. The report notes the need to distinguish maintenance as a

Annotated Bibliography 123 separate activity rather than a part of operations, as it is typically viewed. Furthermore, it noted the lack of correlation between failures and equipment age. Some equipment may need maintenance earlier rather than later. The report also mentions the three main reasons why equipment is considered for replacement: (1) equipment is depleted of function; (2) equipment becomes obsolete; and (3) deterioration due to aging. Another reason could be to match budget policies. Maxham, J. The Art of Troubleshooting. 2014. https://artoftroubleshooting.com/2014/04/25/the-50-percent-rule-repair-or-replace- revisited/. Accessed March 29, 2021. This article discusses repair, rebuild, replace, retire decisions in the context of the 50 percent rule. If repair costs exceed 50 percent of the cost of replacement with a new asset, then the equipment should be replaced. The advantage of using this rule is that it is not affected by changes in the market, such as inflation or technological advantages. If an asset is replaced, some value can be recovered, which is its salvage value. However, the salvage value may not cover the entire repair cost, so an asset manager should consider future needs and anticipate future market conditions when contemplating a repair. Lauria, P. and D. Lauria. 2014. NCHRP Synthesis 452: State Department of Transportation Fleet Replacement Management Practices. TRB, National Research Council, Washington, DC. This report synthesizes the fleet replacement practices of various state DOTs and aims to identify asset replacement methods and financing options. The study notes that replacing assets near their optimal replacement cycle helps DOTs meet their primary goal, which is to build and maintain roads. Replacing an asset when its capital and operation costs are minimized is considered the optimal replacement cycle. On the other hand, retaining assets past their optimal replacement cycle would divert funds to the fleet rather than highway maintenance, thus detracting from the primary mission of the DOT. The study found that recent spending levels indicate long replacement cycles and older fleets. In fact, it found that 50 percent of DOTs have replacement cycles of over 20 years. The study also concluded that there are no standard decision support tools used to justify decisions, nor are there standard methods to secure funding. Gransberg, D. 2015. Major Equipment Life-cycle Cost Analysis. Minnesota Department of Transportation, St. Paul, MN. This report discusses the research undertaken by the Minnesota Department of Transportation to develop a method to optimize life cycle value and maximize cost-effectiveness. Typically, equipment life cycle cost analysis (LCCA) models are used to make repair, replacement, and retention decisions based on the ownership and operating costs, otherwise known as its economic life. A proposed stochastic LCCA model was developed from equipment fleet data. The proposed model utilized probabilistic input variables for capital costs, fuel, and other

124 Decision Making for Repair Versus Replacement of Highway Operations Equipment operating costs. The results demonstrated an enhanced ability to optimize fleet management decisions compared to results obtained by current practices. U.S. Fish and Wildlife Service Heavy Equipment Utilization and Replacement Handbook. 2015. U.S. Fish and Wildlife Service, Washington, DC. This handbook describes best practices to optimize management of the heavy equipment and truck fleet owned and operated by the U.S. Fish and Wildlife Service. Proper fleet management includes making sound repair/replace decisions. The handbook provides minimum requirements for age, utilization, and rehabilitation (repair) costs before the decision is to replace an asset. The minimum requirements for age in years and utilization in hours or miles are specified by equipment class. The repair cost requirement is a one-time repair limit specified as a percentage of replacement cost. The repair limit decrease as the age of the equipment increases with a cap of half of the replacement cost for equipment in the first year of service. MacAllister. 2017. Is It Better to Repair, Rebuild or Replace Heavy Equipment? https://www.macallister.com/is-it-better-to-repair-rebuild-or-replace-heavy-equipment/. Accessed March 18, 2021. This article discusses heavy equipment repair, rebuild, replace, and retire decisions. It includes the considerations and processes asset managers can take to make decisions. For example, it is suggested to verify the warranty status before making a repair, rebuild, replace, or retire decision. If the warranty is expired, a 50/50 equipment replacement rule of thumb may be helpful, which states that a decision to replace should not be made if repair cost is 50 percent or less of the replacement cost. It is noted that repair costs increase gradually to about 30 percent of replacement, then jump to about 50 percent in the next year. In general, a manager should choose the most economical decision when making a repair, rebuild, replace, or retire decision. Asset managers can use LCCA models to examine equipment expenses and better inform their decision. Cost rates per mile or hour to own and operate the equipment are important metrics in repair, rebuild, replace, or retire decisions. Hamilton, R. 2018. NCHRP Research Report 879: Optimal Replacement Cycles of Highway Operations Equipment. Transportation Research Board, Washington, DC. This guide builds on NCHRP Synthesis 452: State Department of Transportation Fleet Replacement Management Practices, which presents the findings of fleet replacement practices in state DOTs. This report is a guide for fleet managers to determine replacement needs and budgets, optimal life cycles, and replacement processes. Though highway agencies have a variety of methods to determine replacement cycles, there is no standard process. According to the guide, the three most commonly used approaches for replacement decisions are: (1) age or utilization, (2) maintenance and repair thresholds, and (3) formal LCCA.

Annotated Bibliography 125 Funding Circle. 2020. Heavy Equipment: When to Rebuild, Repair, or Replace Capital Assets. https://www.fundingcircle.com/us/resources/heavy-equipment-replacement-repair- rebuild/. Accessed March 29, 2021. The decision to repair, rebuild, or replace heavy equipment is influenced by the condition of the asset, cost, maintenance, availability of improved functionality, and time. The repair action addresses a current failure and restores functionality. The rebuild action is longer, more extensive, and more costly but improves equipment condition. Rebuild may be the proper action when repair addresses the symptoms but not the underlying cause of failure. Replacing equipment is appropriate when the equipment is outdated, and repair/rebuild actions are too costly or require too much time. Repair/replace analyses should include a consideration of how many miles or hours can be restored by the repair action. Department of the Army. 2020. Management, Acquisition, and Use of Motor Vehicles. Department of the Army, Washington, DC. Chapter 12 outlines the U.S. Army policy and procedures for determining repair/replacement criteria for Army-owned nontactical vehicles. The decision criteria are age, mileage, cost of repairs, and demonstrated need. When age and mileage criteria are met, then equipment are normally retired (with replacement dependent upon demonstrated need). For equipment not meeting the age and mileage criteria, the economic feasibility of the repair is evaluated against a maximum extensive repair expenditure limit (repair cost limit). The limit is set at 50 percent of the current wholesale value of the equipment.

Abbreviations and acronyms used without denitions in TRB publications: A4A Airlines for America AAAE American Association of Airport Executives AASHO American Association of State Highway Officials AASHTO American Association of State Highway and Transportation Officials ACI–NA Airports Council International–North America ACRP Airport Cooperative Research Program ADA Americans with Disabilities Act APTA American Public Transportation Association ASCE American Society of Civil Engineers ASME American Society of Mechanical Engineers ASTM American Society for Testing and Materials ATA American Trucking Associations CTAA Community Transportation Association of America CTBSSP Commercial Truck and Bus Safety Synthesis Program DHS Department of Homeland Security DOE Department of Energy EPA Environmental Protection Agency FAA Federal Aviation Administration FAST Fixing America’s Surface Transportation Act (2015) FHWA Federal Highway Administration FMCSA Federal Motor Carrier Safety Administration FRA Federal Railroad Administration FTA Federal Transit Administration GHSA Governors Highway Safety Association HMCRP Hazardous Materials Cooperative Research Program IEEE Institute of Electrical and Electronics Engineers ISTEA Intermodal Surface Transportation Efficiency Act of 1991 ITE Institute of Transportation Engineers MAP-21 Moving Ahead for Progress in the 21st Century Act (2012) NASA National Aeronautics and Space Administration NASAO National Association of State Aviation Officials NCFRP National Cooperative Freight Research Program NCHRP National Cooperative Highway Research Program NHTSA National Highway Traffic Safety Administration NTSB National Transportation Safety Board PHMSA Pipeline and Hazardous Materials Safety Administration RITA Research and Innovative Technology Administration SAE Society of Automotive Engineers SAFETEA-LU Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (2005) TCRP Transit Cooperative Research Program TEA-21 Transportation Equity Act for the 21st Century (1998) TRB Transportation Research Board TSA Transportation Security Administration U.S. DOT United States Department of Transportation

D ecision M aking for Repair Versus Replacem ent of H ighw ay O perations Equipm ent Transportation Research Board 500 Fifth Street, NW Washington, DC 20001 ADDRESS SERVICE REQUESTED ISBN 978-0-309-69851-1 9 7 8 0 3 0 9 6 9 8 5 1 1 9 0 0 0 0