Office of Operations
21st Century Operations Using 21st Century Technologies

Applying Transportation Asset Management to Traffic Signals: A Primer

ChapterĀ 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.

FHWA TAMP Elements: Performance Gap Analysis, Financial Planning, Investment Strategies (23 CFR 515.7(a), (d)-(e), 515.9(d)(4), (d)(7)-(8), and 515.9(f))

This theme is extrapolated from three TAMP elements: financial plan, investment strategies, and performance gap analysis. By conducting a needs analysis based on the operations and maintenance of the assets and tying those inputs to its performance measures, agencies can begin to identify the effectiveness of their inputs as well as how to best align those resources. Undertaking this analysis draws heavily on lifecycle planning and risk management analyses. This emerging theme illustrates how agencies are conducting their needs analysis to fuel their investment decisions and convey those findings to their stakeholders.

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.

A flow chart showing three categories of financial plan, life cycle planning, and risk with all three flowing into resource allocation decision making and from there to investment strategy.

Figure 13. Diagram. Resources allocation decisionmaking process.
(Source: FHWA.)

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.

Traffic Signal Performance Projections—Connecticut DOT

Within its 2019 TAMP, Connecticut DOT presented a range of performance outcomes for varying investment scenarios, as shown in figure 14. Further, the agency’s 2019 TAMP stated:

Performance projections for traffic signals were developed based on the current process for managing this asset. Each year, 100 traffic signals that have exceeded their service life would need to be replaced for this asset class to achieve its performance target in future years. Currently, the agency replaces approximately 60 signals each year under the annual traffic signal program that have exceed their service life. Additional traffic signals are upgraded each year under other highway projects and encroachment permits by developers, but some may not have reached their service life.

A line chart showing state goals by traffic signal for 2,777 traffic signals in Connecticut for three investment scenarios.

Figure 14. Graph. Connecticut Department of Transportation traffic signals performance projections.
(Source: Connecticut Department of Transportation, 2019.)

A line chart showing state goals by traffic signal for 2,777 traffic signals in Connecticut for three investment scenarios. The percentage of these traffic signals that are in a state of good repair are shown for preferred funding ($45 million), current funding ($16 million), and no funding ($0) all charted against the SOGR goal which is 80%. Preferred funding brings it to the 80% by 2028, current funding falls just under 60% by 2028 and no funding will bring it to 40% by 2028. All data is based on funding as of December 31, 2018.

In addition to communicating condition outcomes, traffic signals 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 traffic signals. These agencies identified that, with the limited funding available for traffic signals, 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 traffic signal outages.

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.

Several publications describe these approaches further, including the 2016 FHWA Guide, Incorporating Asset Valuation into Transportation Asset Management Financial Plans. Figure 15 is an extract from the 2016 Colorado DOT Asset Valuation Report to illustrate the value of traffic signals relative to other assets. As part of its Asset Valuation Report 2016, Colorado DOT developed a condition-based valuation for traffic signal assets. The condition assessment was age based (percent of asset life expectancy) multiplied by the replacement cost.

An extract from the 2016 Colorado Department of Transportation’s Asset Valuation report.

Figure 15. Diagram. Colorado Department of Transportation traffic signal asset valuation 2016.
(Source: Colorado Department of Transportation, 2016.)

An extract from the 2016 Colorado Department of Transportation’s Asset Valuation report showing a Current value of $962.52 million, replacement value of $962.52 million, percent value remaining of 54.1%, unit cost of $500K / assembly, discrete quantity of 1,852, unit quantity of N/A, average condition of 68.0% age/life and a chart showing the assembly age distribution.

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 11 in the example below indicates asset condition, currently for these assets the “Fair” state is not yet applicable.

Transportation Management System Assets Gap Analysis Outcomes—Caltrans

As part of its TMS and State highway system (SHS), which includes both traffic signals and ITS assets, Caltrans has identified a current gap in performance (percent in good condition, with good condition indicated by the asset being operational and not obsolete) and illustrated the expected 10-year outcome based on different funding scenarios. The gap analysis outcomes are shown in table 11.

Table 11. Caltrans asset gap analysis outcomes.
SHS TMS (assets) Good Fair Poor
Current Performance 58.8% N/A 41.2%
10-Year Expected (Post SB 1) Performance 90.0% N/A 10.0%
10-Year Target Desired State-of-Repair Performance 90.0% N/A 10.0%
Current Gap 31.2% N/A 31.2%
10-Year Projected Gap 0.0% N/A 0.0%

Traffic Signal Management Plans

The purpose of a Traffic Signal Management Plan (TSMP) within an agency is to connect the activities related to traffic signal design, operations, maintenance, and management with the goals and objectives of the agency. As such, a TSMP is a tool that documents activities (e.g., scope of proactive or reactive maintenance) so staff know exactly what they should do and when they should do it. As part of traffic signals asset management, the expectation is that a TSMP will:

  • Document what traffic signal maintenance, operations, and design staff do, why they do it, and how their activities support the agency’s goals and objectives.
  • Provide a firm basis to support maintenance and operations as well as capital budgets.
  • Facilitate succession planning and integration of new staff into the organization.
  • Specify a logical framework within which staff training can be planned and organized.
  • Help agencies become less dependent on key individuals, reduce ad hoc procedures and provide organization and structure for the agency’s activities.

The details provided in a TSMP are often broader than maintenance and operations and help provide a link to planning and design decisionmaking. As such, a TSMP complements asset management and should be implemented in conjunction with traffic signals asset management.

Key Actions

Agencies can implement 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 guide 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 to all stakeholders.

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