Applying Transportation Asset Management to Intelligent Transportation Systems Assets: A Primer

Chapter 7. Resource Allocation—Financial Plan, Investment Strategies, Performance Gap Analysis

Financial planning can ensure that resources are appropriately allocated to maintain a state of good repair, achieve performance targets, minimize lifecycle costs, and address risks for different assets. Most agencies track the expenditure and performance of their high-value assets by asset category, which varies between agencies, based on specific needs and operation. Part of financial planning includes compiling and analyzing historical information on asset condition, performance, and investments to support future projections.

Informing Resource Allocation

Lifecycle planning analysis can be used to inform decisionmakers of the:

• Cost to deliver a strategy—What is the cost to achieve desired performance outcomes?
• Outcomes for a funding scenario—What is the optimal performance outcome that can be achieved with a fixed financial budget?

Each different investment strategy will also result in a different risk profile or outcome. Each of these elements should be considered in resource allocation, as figure 13 shows.

The process of cross-asset allocation is only truly possible with a thorough understanding of the opportunity cost of investing in one asset over another. Agencies operate within constrained budgets. When decisions need to be made about allocating money to certain asset classes (e.g., traffic signals, ITS, pavements, culverts), decisionmakers should understand what will be achieved with the additional money spent as well as what objectives will be deferred by not investing in another asset class.

ITS Performance Projections and Allocations—Colorado DOT

Colorado DOT uses a cross-asset resource allocation (tradeoff analysis) process to assign asset investment levels for the upcoming fiscal years. In this budget setting workshop (referred to as the Delphi workshop in the 2013 Risk-Based Asset Management Plan), the agency prepares 20-year performance curve budget scenarios for each asset class. ITS is included as a category. Since the 2013 Plan, Colorado DOT has also included traffic signals in the budget setting process.

Colorado DOT asset managers use the Asset Investment Management System (AIMS), to develop asset management budget scenarios that explore the relationship between funding and performance. Individual asset managers will input their asset information, maintenance activities, and current asset condition. These individual-asset data points are combined using the AIMS system, and asset managers can make their case for funding. The system enables Colorado DOT to integrate strategic and tactical asset management analysis across several different asset types—including current budgets and future planning/recommended budgets. For example, figure 14 illustrates the recommended budget for fiscal year (FY) 2024. Additionally, Colorado DOT is refining the tool’s ability to conduct cross-asset optimization for cross-resource allocations.

Figure 14. Pie chart. Colorado Department of Transportation asset management recommended budget fiscal year 2024.
(Source: Colorado Department of Transportation, 2019.)

In addition to communicating condition outcomes, ITS assets have great potential to illustrate the benefit of additional investment, which can provide powerful support to specific investment strategies. Various agencies identified the tension between meeting mandatory requirements for pavements and bridges as well as funding needs for other asset classes including ITS devices. These agencies identified that with the limited funding available for ITS assets, specific metrics such as the number of crashes and traffic volume, were used to prioritize investment allocations. This approach could be taken one step further to understand the impact of longer response times on traffic flow or even the increase in crash rates associated with ITS device downtime.

Asset Valuation

Asset valuation can be a powerful tool to communicate the outcome of different investment strategies or to track the impact of changing conditions over time. Key ways to address asset valuation include but are not limited to:

• Replacement Value—Uses current market prices to rebuild/replace the asset.
• Condition Based Value (Depreciated Replacement Cost Method)—Uses current market prices to rebuild/replace with depreciation to represent wear within expected life.

Figure 15 is an extract from the Colorado DOT Asset Valuation Report, to illustrate the value of ITS assets relative to other assets. As part of its Asset Valuation Report 2016, Colorado DOT developed a condition-based valuation for ITS assets. The condition assessment was age based (percentage of the asset life expectancy) multiplied by the replacement cost.

Figure 15. Diagram. Colorado Department of Transportation intelligent transportation systems asset valuation 2016.
(Source: Colorado Department of Transportation, 2016.)

Communicating an Investment Strategy

Once an investment strategy is established, there should be clear communication to all stakeholders. This communication should consider the following audiences:

• Stakeholders—Communication to internal and external stakeholders so that all understand expected outcomes that are planned.
• Those Responsible for Delivery—So that they understand the targets that are expected to be achieved and how it is anticipated this will be delivered.

A TAMP can be used as a tool for communicating expected outcomes to stakeholders. California DOT (Caltrans) recently undertook a gap analysis as part of its TAMP development (Caltrans 2018). Table 12 in the example below indicates asset condition, currently for these assets the “Fair” state is not yet applicable.

Key Actions

Agencies can adopt or improve upon several key actions when adopting resource allocation practices.

Develop a Process to Inform Resource Allocation Decisionmaking

Lifecycle planning, risk management, and a financial plan can inform decisionmakers on effective resource allocation approaches.

Key Steps:

• Provide information (e.g., investment scenarios and performance outcomes) for decisionmaking.
• Agree on a resource/investment approach.
• Set and communicate performance expectations based on investment approach.
• Identify opportunities to improve the decisionmaking process (e.g., additional information desired).
• Implement new decisionmaking process, through a phased or pilot approach (focus on one asset class at a time or a certain region).

Utilize Asset Valuation

Asset valuation can be a powerful tool to communicate the outcome of different investment strategies or to track the impact of changing conditions over time.

Key Steps:

• Understand the valuation approaches and data available to undertake an assessment.
• Complete a valuation of the assets.
• Monitor the change in asset value to inform investment decisionmaking.

Communicating Investment Strategies

Once an investment strategy has been agreed upon, there should be clear communication, so that it is understood by those that need to implement the strategy.

Key Steps:

• Understand how best to communicate decisions to those responsible for implementation.
• Implement communication approach.
• Monitor implementation effectiveness and provide feedback.