Traffic Incident Management Cost Management and Cost Recovery
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Traffic Incident Management Cost Management and Cost Recovery
Development Notes: This presentation is intended to be delivered by a mid-level transportation agency manager to executive leadership of the transportation agency and/or other executive level TIM program stakeholders.
- Briefing Objective and Overview
- Statement of the Problem
- Moving Towards a Sustainable TIM Program
- Action Plan
This briefing is intended for executive level managers who will be responsible for directing the adoption of TIM Cost Management and Cost Recovery concepts. Topics covered in this presentation include: Overview and Objectives of the Briefing, Statement of the Problem, characteristics of a sustainable TIM Program, and an action plan for implementation.
To provide executive leadership with guidance to better manage traffic incident management program resources
The need to operate our existing roadway network more efficiently continues to be identified as a necessity as funding to expand the system becomes more difficult to obtain. Traffic incident management is one strategy that transportation and public safety officials can use to mitigate non-recurring congestion that is caused by traffic crashes and planned special events. However, executing a successful program has an associated recurring operational cost to the agencies that participate. For these recurring costs, it is important to identify opportunities to recover costs so that these programs can be self-sustaining. This briefing will provide an action plan that we can use to establish a self-sustaining traffic incident management program.
Cost Recovery Defined
- Reimbursement received from outside sources
- Examples: Federal grant sources, MPOs, private interest, or others
- Cost recovery vs. cost substitution
Costs are classified as being recovered when the program receives reimbursement from sources outside of the budget that is then used to fund the program. Cost recovery would involve sources outside the Governor's budget purview, such as costs recovered from federal grant sources, metropolitan planning organizations, or private interests.
Understanding the difference between cost recovery and cost substitution is a key consideration. Cost substitution is simply replacing a portion of the budget used for incident response from another source within the same budget, for example moving funds between state agencies.
Cost Management Defined
- There are four fundamentals of cost management
- Cost Planning
- Cost Tracking
- Cost Analysis
- Evaluation and Decision
Cost management can be broken down into four different fundamental areas. Each is interdependent on the other as this diagram shows.
Cost Planning is simply estimating future costs and budgeting. Budgets are based on knowledge about historic costs that has been gained in large part from good tracking and analysis. Budgets for new activities or expansions may include detailed analysis of a capital purchase (e.g., equipment, software).
Cost Tracking involves coding discrete activities and their associated costs or cost drivers, such as personnel time sheets, vehicle mileage logs, supplies purchases, and contract payments. Often there is a demonstrated need to implement the National Incident Management System with TIM and the cost tracking fundamental of cost management is where NIMS can affect the financial aspect of TIM.
Cost Analysis requires cost data processing to create cost information—information that will be useful in evaluation, decision-making, and planning. Analysis can produce any of a wide variety of measures across a number of dimensions, including time trends, percentages, and per-unit measures. Examples of static, per unit measures include agency employee hours per incident and labor cost per incident. Examples of temporal analysis measures include trends in labor rates and trends in fuel costs. Examples of percentage measures include labor cost and fuel cost as a percentage of total operating costs.
Evaluation and Decision. Cost information produced in the analysis stage is evaluated to support decision-making for future programming, resource allocations, and asset management; to support cost recovery mechanisms; and to support appeals to higher level decision-makers for continued or enhanced funding. Subsequent chapters address these elements.
Cost Recovery Defined
Recognizing full or partial reimbursement from sources outside of the budget
Costs are classified as being recovered when the program receives full or partial reimbursement from sources outside of the budget. Once costs are recovered, they can pay back the originator or be reinvested for future activity. Costs can be recovered from responsible parties (e.g., insurers, property owners), from associated or interested third parties (e.g., government grants for specific activities), or in the form of payment for service (e.g., incentives based on time or effort). As transportation operations, and more specifically TIM, become a more mature part of transportation agency services, jurisdictions must understand the true cost of responding to traffic incidents and identify ways to offset or recoup these recurring costs. FHWA presents this document as a contribution to the sparse body of knowledge on the topic and provides a vision towards which transportation agencies can begin to work as TIM programs become a transportation agency mainstay. The scope of this document is limited to costs directly associated with incident mitigation. Costs associated with responder injuries and long-term health care needs due to traffic incidents are not considered.
Overview of Traffic Incident and Event Management
- Effective TIM programs form the basis for preparedness for other transportation emergencies
- All effective programs include close coordination with a range of agencies, including public safety officials
Traffic incident management consists of a planned and coordinated multi-disciplinary process to detect, respond to, and clear traffic incidents so that traffic flow may be restored as safely and quickly as possible. Effective TIM reduces the duration and impacts of traffic incidents and improves the safety of motorists, crash victims and emergency responders. The mission of TIM directly supports the goal towards zero deaths by identifying processes and procedures for all roadway users and specifically the high risk group of emergency responders.
Transportation emergencies can take many different shapes and sizes. The emergency transportation operations continuum shown here indicates that traffic incidents are typically the least severe transportation operations events and are also the most frequently occurring. On this basis, it is understandable how an effective TIM program can help improve overall preparedness for transportation emergencies of all types. This may be true because agency coordination, communication, cooperation and collaboration are some of the most important factors to successful TIM, and since many of the stakeholders are constant across the ETO continuum, TIM events can be used to set the foundation for successful large scale event management and mitigation.
Overview of Typical Traffic Incident Management Activities
|TIM Strategic Activities
||TIM Tactical Activities
||TIM Support Activities
- TIM Teams
- Policies and Procedures
- Vehicle Purchases
- System Deployment
- Software Deployment
- Asset Purchases
- Asset Typing
- Resource Typing
- Agency Notification
- Resource Dispatch
- Scene Setup
- Device Activations
- Traffic Diversions
- Queue Monitoring
- Investigative Procedures
- Victim Extrication and Transport
- Vehicle Clearance
- HAZMAT Mitigation
- Data Collection
- Data Integration
- Data Sharing
- Traveler Information
- After Action Reviews
- Cost Management
- Cost Recovery
Activities associated with a TIM program can be classified into three different categories:
- Strategic activities provide the underlying basis for organizing and sustaining a program.
- Tactical activities are completed at the scene of a crash and can also include the policies in place to guide on-scene activities.
- Support activities include tools and technologies that are implemented to improve incident detection, response and clearance.
Each of these activity categories has associated costs that can be managed and may be recoverable. Not surprisingly, tactical activities receive the greatest amount of attention regarding cost recovery. Since that involves physical activities at the scene of crashes, that could be expected. At transportation agencies, there are significant costs for equipment needed to respond to scenes; however, that equipment is typically dual use between maintenance activities and TIM activities. In the strategic category, the greatest cost is on resource utilization. This could be expected to be the category least capable of recovering costs but does provide an excellent opportunity for cost management. Support activities can also be a source of significant TIM expenditures, especially to transportation agencies. By developing and implementing systems to achieve interoperability and improved performance measurement, transportation agencies bare great costs.
Impact of Incidents
- TIM will continue to be required
- More than 5 million reported crashes in 2009
- Nearly 31k fatal and more than 1.5 million injured
- A minimum response of police, fire/rescue and towing with coordination with transportation
According the National Highway Traffic Safety Administration's General Estimate System, the number of Reported Motor Vehicle Crashes in 2009 totaled 5,505,000. While many sources suggest that only half of all motor vehicle crashes are reported, typically only those reported require response and result in the expenditure of responder agency resources. Of these reported crashes, 30,797 resulted in fatalities and 1,517,000 included injuries. Each of these fatal and injury crashes results in a major incident on the roadway that requires a significant level of response—at a minimum police, fire/rescue, and likely towing.
Statement of the Problem
- Fiscal impacts of TIM will continue
- Tactical costs can exceed $200k
- There are no tabulations of costs associated with strategic and support activities
- Other costs such as insurance, responder training, lost wages by injured first responders, and other societal costs are unknown
The United States is faced with an economy that is only now coming out of a recession, and its future remains uncertain. According to the National Association of State Budget Officers, general fund spending among the States remains at $18.7 billion, or 2.7 percent below peak fiscal 2008 levels. Fiscal Year 2011 general fund spending saw a decline of 6.3 percent from peak 2008 levels.
Balanced budget laws, in effect in most States, require State agencies to cut programs and services to offset decreased revenues and funding. As a result, State and local programs will come under increased scrutiny, and program managers will need to justify funding for each program through performance measurement data and cost-benefit analyses. Only after a method and data are in place will cost-benefit analyses be possible. State budget cuts affect all first response agencies and entities, which in turn are likely to limit responders' ability to provide an appropriate level of response to traffic incidents across the nation.
If TIM cost management and cost recovery are to become important to an agency, then it is important to understand exactly what the costs are associated with TIM. Currently there is no consistent understanding of TIM costs across the US. It is especially evident with regard to strategic and supporting TIM costs.
Moving Toward TIM Program Sustainability
- Implement accounting procedures that allow for a true understanding of all TIM Costs
- Consider activities that allow costs to be recovered
Understanding the full cost effect that a TIM program has on an agency and its stakeholders is essential before recovery can be sought. A program that sustains itself will consist of a focus on both the management and recovery of costs.
A Roadmap for TIM Cost Management
- Asset Utilization
- Consists of the process to understand costs of devices, facilities and other physical, non-human TIM program elements
TIM cost management involves three basic elements: asset management, resource management and performance measurement. Asset management and asset performance is becoming an important discussion item among other transportation agency areas of business and that should be extended to the traffic incident management program.
A Roadmap for TIM Cost Management (cont'd)
- Resource Utilization
- Consists of the process to understand costs associated with personnel (including both in-house and consultant) situations
By basing a program on the national incident management system, a method for collecting resource commitments can be obtained and understood by all those involved. Developing and implementing a cost management electronic system will help increase the visibility of TIM as an area of business. Standard accounting methods such as cost-center accounting can be used to gather and compile these costs in a central system.
A Roadmap for TIM Cost Management (cont'd)
- Performance Measurement
- Consists of understanding what benefit assets and resources are providing to the system or what implications that lack of assets and resources are having on overall performance.
The importance of performance measurement continues to be more fully understood everyday, and that also applies to TIM. A cost analysis process must use TIM performance measures that are tied to economic impacts as a basis to be a valuable tool.
A Roadmap for TIM Cost Management (cont'd)
- Determine TIM Inputs for asset management
- Collect baseline requirements
- Complete TIM system inventories
- Maintain maintenance costs and operating costs for historical reference
- Use asset life-cycle and replacement cost estimates to plan for costs on an annual basis
- Use visualization tools to convey the cost of assets versus performance
- Determine discrete TIM functions by discipline and by position
- Determine shared resources and interdependent resources
- Baseline employee capabilities versus each identified discrete function
- Identify gaps in functions provided
- Develop resource training lifecycle
- Include systems to include discrete coding functions for direct and indirect
- Use cost center accounting to track and analyze TIM resource costs
- Assign a charge code for TIM strategic, tactical and support activities
- Determine how the NUG should be measured
- Determine what input and output gaps exist for NUG reporting
- Implement a NUG Performance Measurement Program
- Collect baseline information to establish a performance index
- The performance measures from other sections
Many agencies are not yet ready to execute a TIM cost management process. This roadmap provides direction for starting a TIM cost management process where none currently exist and then transitioning the start-up program into an established aspect of the TIM program.
Options for Recovering Costs
- Seek and support legislative actions that enable recovery
- Examine opportunities for public-private partnerships
Once TIM costs are fully understood, additional cost recovery methods may be revealed. Currently, there are two strategies to pursue to enable transportation agencies and all TIM stakeholders to conduct cost recovery activities. The ability to collect fees from road users that require response typically require legislation. Existing legislation is currently at the local level through individual ordinances. Public-private partnerships will continue to be examined as a way for transportation agencies to reduce their spending, and that also applies to traffic incident management.
Legislation for Recovery
- Current legislation enabling first responders to collect fees is enacted at the local level
- An opportunity to recover costs is with modification to state statues that stipulate recovery of costs for damages to infrastructure
- Tactical TIM costs should be viewed as part of the recovery process, including first responder costs
Local municipalities and cities are struggling with the public perception that enacting ordinances to collect fees from drivers who need TIM is over taxation, and many localities that have enacted these fees have repealed them or stopped enforcing them. The best opportunity to achieve legislative cost recovery could be through modification to state statutes that allow for cost recovery when infrastructure is damaged. Many of these statutes have been enacted since before the value and need of TIM were recognized. Including tactical TIM costs as recoverable in these statutes could help offset some of the cost.
- Many transportation agencies already use these partnerships with safety service patrol programs
- Expand TIM cost considerations and seek these types of partnerships:
- The sale of traffic data to private vendors
- Implementation of HOT lanes and the inclusion of TIM costs as a part of the calculated costs
Many foreign countries such as Australia and New Zealand have privatized transportation operations, including TIM. In New Zealand for example, the Transport Agency awards long-term road network management contracts where the contractor acts on behalf of the agency. This is similar to the intelligent transportation system delivery and procurement methods used in some states where a systems manager is hired. This by itself, though, is not cost recovery. The next step for many of these countries is to allow the network manager to introduce concessions for services. Until that can be examined more fully for applicability in the US, TIM cost calculations should be considered when determining rates for selling traffic data and implementing high occupancy toll lanes.
- Establish and formalize TIM programs that have strategic direction and multi-disciplinary participation
- Implement the Cost Management Roadmap
- Coordinate with legislators and private industry to identify and implement cost recovery methods
The action plan for moving towards a sustainable TIM program includes three core activities. First, establishing a TIM program that includes a strategic direction is essential for predicting costs and right-sizing the program. Using the cost management roadmap as a guide will help organize costs in a manner that is appropriate as recover is considered. Finally, developing the ability to recover TIM costs with legislators and private industry will help identify ways to further streamline services and ultimately, reveal additional ways to recover costs.