ralph86 - university of waterloo

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MANAGING CIVILMANAGING CIVILINFRASTRUCTURE AND ROLE INFRASTRUCTURE AND ROLE

OF LIFE CYCLE COST OF LIFE CYCLE COST ANALYSIS ANALYSIS

Professor Ralph Haas, CMProfessor Ralph Haas, CM

Special Lecture toCIV E 240 ClassCIV E 240 Class

UW, July 7UW, July 7thth, 2005, 2005

CHALLENGES OF MANAGINGCHALLENGES OF MANAGINGTHE BUILT INFRASTRUCTURETHE BUILT INFRASTRUCTURE

Ralph Haas, CMRalph Haas, CMUniversity of WaterlooUniversity of Waterloo

Keynote Lecture to11stst Speciality Conference on Speciality Conference on Infrastructure Technologies, Infrastructure Technologies,

Management and PolicyManagement and Policy

CSCE, Toronto, June 2, 2005CSCE, Toronto, June 2, 2005

GOOD MANAGEMENTGOOD MANAGEMENT

AND TECHNOLOGYAND TECHNOLOGY

PLUS ADEQUATEPLUS ADEQUATE

FINANCING, PROPERFINANCING, PROPER

SUCCESSION PLANNINGSUCCESSION PLANNING

AND SECURITY ARE AND SECURITY ARE

VITAL TO VITAL TO

PRESERVATION OF OURPRESERVATION OF OUR

INFRASTRUCTURE INFRASTRUCTURE

ASSETSASSETS7. COMMUNICATION7. COMMUNICATION7. COMMUNICATION

6. RECREATION FACILITIES6. RECREATION FACILITIES6. RECREATION FACILITIES

5. BUILDINGS5. BUILDINGS5. BUILDINGS

4. ENERGY PRODUCTION4. ENERGY PRODUCTION4. ENERGY PRODUCTIONAND DISTRIBUTIONAND DISTRIBUTIONAND DISTRIBUTION

3. WASTE3. WASTE3. WASTEMANAGEMENTMANAGEMENTMANAGEMENT

2. WATER AND2. WATER AND2. WATER ANDWASTEWATERWASTEWATERWASTEWATER

1. TRANSPORTATION1. TRANSPORTATION1. TRANSPORTATION

PRESENTATIONPRESENTATION

BackgroundBackground

Framework for managing our Framework for managing our infrastructure assetsinfrastructure assets

Key issues / challengesKey issues / challenges

Options for infrastructure Options for infrastructure sustainabilitysustainability

Role of life cycle cost analysisRole of life cycle cost analysis

Opportunities and the futureOpportunities and the future

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19811981

19881988

U.S. NATIONAL SCIENCEU.S. NATIONAL SCIENCEFOUNDATION (1995)FOUNDATION (1995)

" A Civilization’s rise and fall . . . depends oninfrastructure - . . . the underlying foundation of wealth and quality of life. A society that neglects its infrastructure loses its ability to transport people and food, provide clean air and water, control disease and conduct commerce. "

REPORT CARD: USREPORT CARD: US

RoadsRoads C+C+ D+ D D+ D Mass TransitMass Transit CC-- CC-- D+D+AviationAviation BB-- D D+D D+WaterWater BB-- DD DD--WastewaterWastewater CC D DD D--Solid WasteSolid Waste CC-- C+ C+C+ C+Hazardous WasteHazardous Waste DD D+ DD+ D

1988 1988 ““FragileFragileFoundationsFoundations””

20012001ASCEASCE

“Infrastructure Deficit, 2005 $1.6 Trillion~

20052005ASCEASCE

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www.infrastructure reportcard.org

AviationBridgesDamsDrinking WaterEnergyHazardous WasteNavigable WaterwaysPublic Parks and RecreationRailRoadsSchoolsSecuritySolid WasteTransitWastewater

D+CDD-DDD-C-C-DDIC+D+D-

2005 Report Card forAmerica’s Infrastructure

America’s Infrastructure GPA = D

Total Investment Needs = $1.6 Trillion(estimated 5 year need)

REPORT CARD FOR CANADA 2005REPORT CARD FOR CANADA 2005

RoadsRoads C ?C ? DDTransitTransit CC-- ?? D+D+WaterWater C C –– D ?D ? DD--WastewaterWastewater C ?C ? DD--Solid WasteSolid Waste C+ ?C+ ? C+C+Hazardous WasteHazardous Waste D ?D ? DD

“Infrastructure Deficit, 2005 $150 Billion~

U.S. U.S. ComparisonComparison

In 2001, the federal government, through its Infrastructure Canada Program (IC) and the National Research Council (NRC), joined forces with the Federation of Canadian Municipalities (FCM) to create the National Guide to Sustainable Municipal Infrastructure. The Guide is both a new, national network of people and a growing collection of published best practice reports for use by decision-makers and technical personnel in the public and private sectors. Based on Canadian experience and research, the reports set out the best practices to support sustainable municipal infrastructure decisions and actions in six key areas: 1) municipal roadsand sidewalks 2) potable water 3) storm and wastewater 4) decisionmaking and investment planning 5) environmental protocols and 6)transit.Its creation is made possible through $12.5 million from Infrastructure Canada, in-kind contributions, technical resources, the collaborative effort of municipal practitioners, researchers and other experts, and a host of volunteers throughout the country. By gathering and synthesizing the best Canadian experience and knowledge, the Guide helps municipalities get the maximum return on every dollar they spend on infrastructure -while being mindful of the social and environmental implications of their decisions. To date, 21 best practices have been published. The best practices are available on-line and in hard copy.

20032003“municipal infrastructure is decaying faster than it is being renewed”

Are We Getting The Message Across ?Are We Getting The Message Across ?

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WHY: COMPETING DEMANDS ?WHY: COMPETING DEMANDS ?

DEMANDS

Proper HealthCare

Schools

Staffing

Mobility

Protect theEnvironment

Keep TaxesLow

Improve Services

Safety andSecurity

Maintenance and Repairs

ISSUES

WHY: SOME BIG ISSUES ?WHY: SOME BIG ISSUES ?

Not Getting the Message Across ?Not Getting the Message Across ?Apathy ?Apathy ?Avoidance ?Avoidance ?Lack of Adequate $ ?Lack of Adequate $ ?Confusion ?Confusion ?Frustration ?Frustration ?Lack of Good Management ?Lack of Good Management ?

Higher Priority Demands ? Higher Priority Demands ?








MANAGEMENTMANAGEMENT OF CIVIL INFRASTRUCTUREOF CIVIL INFRASTRUCTURE

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19971997

InfrastructureInfrastructureManagementManagement

oror

AssetAssetManagementManagement

oror

FacilitiesFacilitiesManagement ?Management ?

EVOLUTIONEVOLUTION

1970's 1970's ………………………… Pavement ManagementPavement Management1980's 1980's ………………………… Bridge ManagementBridge Management1990's 1990's ………………………… Asset ManagementAsset Management

Why !Why !

Private sector business principles for managing public assetsPrivate sector business principles for managing public assets

But: But: Private sector profit motivePrivate sector profit motivePublic sector many objectives and Public sector many objectives and demandsdemands

Result: Result: Adjustments are not simple or straightforwardAdjustments are not simple or straightforward

LEVELS OFLEVELS OFASSET MANAGEMENTASSET MANAGEMENT

Strategic levelStrategic level

Network / system wide Network / system wide levellevel

Project / site specific Project / site specific levellevel

AGENCY (PUBLIC OR PRIVATE) BUSINESS SCOPE

• Classes / Types of Assets, Locations, Amount or Extent

• Current Status or Condition• Current Asset Values• Level(s) of Service Targets• Current Under Performing

(Deficient) Assets• Investment Needs

Models / Estimates

CORPORATE DATA BASE

AND EXECUTIVEINFORMATION

SYSTEM

Time Horizons

Criteria

Measuresand

Methods

GENERAL

PRINCIPLES

OF

ASSET

MANAGEMENT

INCLUDING

A

DECISION

PROCESS

STRATEGIC LEVEL

NETWORK LEVEL • Future Deficiencies• Program Alternatives and Costs• Budgets and Program Selection• Future Asset Values

IMPLEMENTATION

IntegrationPlatform

PROJECT LEVEL

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KEY ELEMENTS OF AN INTEGRATION PLATFORMKEY ELEMENTS OF AN INTEGRATION PLATFORM

CORPORATEDATA BASE AND

EXECUTIVEINFORMATION

SYSTEM

INTEGRATIONPLATFORM

LocationReference(GIS Base)

AssetValuation

Level ofService

RiskExposure








A. Institutional and Policy RelatedA. Institutional and Policy Related

Financing (short and long term)Financing (short and long term)Built infrastructure needs vs. expansion / new Built infrastructure needs vs. expansion / new infrastructureinfrastructure““P3P3’’ss”” vs. institutional operationvs. institutional operationPreservation / preventive maintenance policyPreservation / preventive maintenance policyKnowledge management / succession Knowledge management / succession planning policy (people, technology and planning policy (people, technology and information)information)

KEY ISSUES / CHALLENGESKEY ISSUES / CHALLENGES

7. COMMUNICATION7. COMMUNICATION

6. RECREATION FACILITIES6. RECREATION FACILITIES

5. BUILDINGS5. BUILDINGS

4. ENERGY PRODUCTION4. ENERGY PRODUCTIONAND DISTRIBUTIONAND DISTRIBUTION

3. WASTE3. WASTEMANAGEMENTMANAGEMENT

2. WATER AND2. WATER ANDWASTEWATERWASTEWATER

1. TRANSPORTATION1. TRANSPORTATION








Numerous examples Numerous examples and variationsand variationsSome success storiesSome success storiesSome disastersSome disastersNot simple; proper Not simple; proper structuring, financing, structuring, financing, performance performance requirements, etc. are requirements, etc. are essential !essential !

Privatization / Privatization / ““P3P3””

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End ofEnd ofLife CycleLife Cycle

AsAsBuiltBuilt

Limit ofLimit ofAcceptabilityAcceptability

ExtraExtraYearsYears

AA

Application of PreventiveApplication of PreventiveMaintenance HereMaintenance Here

Slower RateSlower Rate

CorrectiveCorrectiveMaintenance Only Maintenance Only

MeasureMeasureofof

DeteriorationDeteriorationoror

ServiceabilityServiceability

BB

KNOWLEDGE MANAGEMENT /KNOWLEDGE MANAGEMENT /SUCCESSION PLANNINGSUCCESSION PLANNING

PeoplePeople

TechnologyTechnology

DataData

..........

..........

..........

..........

..........

..........

B. Combination of Institutional with B. Combination of Institutional with Technical and EconomicTechnical and Economic

Security of vulnerable infrastructureSecurity of vulnerable infrastructureSustainable policy of R and DSustainable policy of R and DDeveloping risk exposure procedure Developing risk exposure procedure applicable to all infrastructureapplicable to all infrastructure


GOOD MANAGEMENTGOOD MANAGEMENT

AND TECHNOLOGYAND TECHNOLOGY

PLUS ADEQUATEPLUS ADEQUATE

FINANCING, PROPERFINANCING, PROPER

SUCCESSION PLANNINGSUCCESSION PLANNING

AND AND SECURITYSECURITY ARE ARE

VITAL TO VITAL TO

PRESERVATION OF OURPRESERVATION OF OUR

INFRASTRUCTURE INFRASTRUCTURE

ASSETSASSETS7. COMMUNICATION7. COMMUNICATION7. COMMUNICATION







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C. Technical and EconomicC. Technical and Economic

Objectively based, measurable Objectively based, measurable performance indicatorsperformance indicatorsAppropriate asset valuation methodologyAppropriate asset valuation methodologyGenerically based LCCA procedureGenerically based LCCA procedureGeneric level of service (LOS) conceptGeneric level of service (LOS) concept


PERFORMANCE INDICATORS FORPERFORMANCE INDICATORS FORPROPERLY FUNCTIONING PROPERLY FUNCTIONING

ASSET MANAGEMENTASSET MANAGEMENTSYSTEMSSYSTEMS

Ralph HaasRalph HaasSusan TigheSusan Tighe

Lynne Cowe FallsLynne Cowe Falls

Excerpts From:Excerpts From:

ARRB ConferenceARRB ConferenceCairnsCairns

May, 2003May, 2003

BASIC ISSUEBASIC ISSUE

MISSION STATEMENT: .......................... safe, economic, efficient.........

................. infrastructure .................

How to Reconcile With ?How to Reconcile With ?

Stakeholder GroupsStakeholder GroupsSpecific, objective,Specific, objective,consistentconsistent

performanceperformanceindicatorsindicators

1. What assets ?1. What assets ?2. Condition ?2. Condition ?3. Value ?3. Value ?

Basic QuestionsBasic Questions

VALUATION OF ASSETSVALUATION OF ASSETS

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1. Book value1. Book value2. Replacement cost2. Replacement cost3. Written down replacement cost3. Written down replacement cost4. Equivalent present worth in place4. Equivalent present worth in place5. Productivity realized value5. Productivity realized value6. Market value6. Market value

MethodsMethods

VALUATION OF ASSETSVALUATION OF ASSETS

LIFE CYCLE ANALYSISLIFE CYCLE ANALYSIS

LevelLevelofof

ServiceService(LOS)(LOS)

AgeAge

MinimumMinimumAcceptableAcceptable

LifeLife--CycleCyclePeriodPeriod

Require:Require: LOS vs Age ModelCost / Cash Flow Calculation (eg. PW)Asset Value vs Age CalculationRisk Analysis

LEVEL OF SERVICE APPLICATION ACROSSLEVEL OF SERVICE APPLICATION ACROSSINFRASTRUCTURE ELEMENTSINFRASTRUCTURE ELEMENTS

(City of Edmonton Infrastructure Strategy)(City of Edmonton Infrastructure Strategy)

A (V. Good)A (V. Good)B (Good)B (Good)C (Fair)C (Fair)D (Poor)D (Poor)F (Critical)F (Critical)

““TranslationTranslation””Into NumericalInto Numerical

RatingsRatings

PhysicalPhysicalConditionCondition

Demand /Demand /CapacityCapacity

FunctionFunction--alityalityLOSLOS

ClassificationClassification








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ASSET MANAGEMENTASSET MANAGEMENT

OPTIONS FOR INFRASTRUCTUREOPTIONS FOR INFRASTRUCTURESUSTAINABILITYSUSTAINABILITY

Develop a comprehensive Develop a comprehensive infrastructure strategyinfrastructure strategy

Additional funding / revenueAdditional funding / revenue

Effective asset managementEffective asset management

OPTIONS OPTIONS ((Cont.dCont.d))SUCCESSION PLANNINGSUCCESSION PLANNING

PeoplePeople


DataData

..........

..........

..........

..........

..........

..........

7. COMMUNICATION7. COMMUNICATION7. COMMUNICATION














Proper succession and sustainability Proper succession and sustainability planningplanning

Create utilities (full cost recovery)Create utilities (full cost recovery)

Mandated approach (eg., GASB 34; Mandated approach (eg., GASB 34; Capital Reserve Funds; Privatization)Capital Reserve Funds; Privatization)

Others (pray, Lotto 649 Others (pray, Lotto 649 ……. ?). ?)

COMPREHENSIVE INFRASTRUCTURE STRATEGYCOMPREHENSIVE INFRASTRUCTURE STRATEGY(City of Edmonton Example)(City of Edmonton Example)

Part of Plan Edmonton (2001)Part of Plan Edmonton (2001)Infrastructure Condition Infrastructure Condition AssessmentAssessmentInfrastructure Gap ($)Infrastructure Gap ($)Level of Service Concept for Level of Service Concept for All Infrastructure ElementsAll Infrastructure ElementsOptions (Strategic, Network Options (Strategic, Network and Project Levels)and Project Levels)Life Cycle AnalysisLife Cycle AnalysisRisk AssessmentRisk Assessment

ADDITIONAL FUNDING / REVENUES ?ADDITIONAL FUNDING / REVENUES ?

Federal

Provincial

oror

oror

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ASSET MANAGEMENTASSET MANAGEMENT

APPLICATION LEVELSAPPLICATION LEVELS

1. Strategic (Corporate 1. Strategic (Corporate Business Plan)Business Plan)

2. Network / System wide2. Network / System wide

3. Project / Site specific3. Project / Site specific

OPTIONS OPTIONS ((Cont.dCont.d))SUCCESSION PLANNINGSUCCESSION PLANNING

PeoplePeople


DataData

..........

..........

..........

..........

..........

..........















Proper succession and sustainability Proper succession and sustainability planningplanning

Create utilities (full cost recovery)Create utilities (full cost recovery)

Mandated approach (eg., GASB 34; Mandated approach (eg., GASB 34; Capital Reserve Funds; Privatization)Capital Reserve Funds; Privatization)

Others (pray, Lotto 649 Others (pray, Lotto 649 ……. ?). ?)















Full cost recovery and Full cost recovery and capital reserve planningcapital reserve planning

Acceptability ?Acceptability ?Governance ?Governance ?Efficiency ?Efficiency ?As CostAs Cost--Effective as Effective as Privatization ?Privatization ?

Create UtilitiesCreate Utilities

butbut

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MANDATED APPROACHMANDATED APPROACH

All U.S. All U.S. Municipalities Municipalities and States and States Are Reporting Are Reporting Activities / Activities / Expenditures Expenditures and Net Assets and Net Assets By End of 2004By End of 2004

Alternatives Alternatives 1. Direct Approach 1. Direct Approach

Reporting of Reporting of Asset ValueAsset Value

2. Modified Approach 2. Modified Approach (Reporting (Reporting Condition) if Condition) if Management Management System In PlaceSystem In Place

MANDATED CAPITAL RESERVEMANDATED CAPITAL RESERVEFUND PLANNINGFUND PLANNING

ReserveReserveFundFund

AccumulationAccumulationandand

ExpendituresExpenditures

YearsYears0000

TimeTimeHorizonHorizon

AccumulationAccumulationCapital ExpendituresCapital Expenditures








ROLE OF LIFEROLE OF LIFE--CYCLE COST ANALYSISCYCLE COST ANALYSISIN ASSET MANAGEMENTIN ASSET MANAGEMENT

City of EdmontonCity of Edmonton’’ssInfrastructure StrategyInfrastructure Strategy

Case ExampleCase Example

Ralph HaasRalph HaasUniversity of WaterlooUniversity of Waterloo

CSCE WorkshopsCSCE WorkshopsOttawa, May 12, 2004Ottawa, May 12, 2004Calgary, May 13, 2004Calgary, May 13, 2004

Toronto, September 23, 2004Toronto, September 23, 2004Fredericton, Oct. 20, 2004Fredericton, Oct. 20, 2004St. JohnSt. John’’s, Nov. 4, 2004s, Nov. 4, 2004Winnipeg, Nov. 9, 2004Winnipeg, Nov. 9, 2004

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1. Background1. Background

2. LCCA Basics (application levels, 2. LCCA Basics (application levels, principles, methods)principles, methods)

3. LCCA within corporate business 3. LCCA within corporate business plan (City of Edmonton)plan (City of Edmonton)

4.4. Network and Project Level Network and Project Level ExamplesExamples


LCCA APPLICATION LEVELSLCCA APPLICATION LEVELS




PURPOSE OF LCCAPURPOSE OF LCCA

Compare alternative Compare alternative (competing) strategies, over (competing) strategies, over a life cycle period, using a life cycle period, using economic principleseconomic principles

Identify what, where and Identify what, where and when for best value on when for best value on expendituresexpenditures

Decision support (Decision support (notnot the the decision itself !)decision itself !)

$$ $$

?? ??

$$ $$

?? ??

WHAT LCCA CAN NOT DOWHAT LCCA CAN NOT DO

LCCA can not answer LCCA can not answer questions of equity questions of equity among competing among competing infrastructure typesinfrastructure types

because ofbecause of

EconomicEconomic SocialSocialPolitical Political

ConsiderationsConsiderations

vs.vs.

vs.vs.

vs.vs.

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DIFFERENCE BETWEEN LCCADIFFERENCE BETWEEN LCCAAND FINANCIAL PLANNINGAND FINANCIAL PLANNING

LCCA is used to compare alternatives and LCCA is used to compare alternatives and identify most costidentify most cost--effectiveeffective

Financial planning (corporate level activity) Financial planning (corporate level activity) is concerned with cash flows (revenues, is concerned with cash flows (revenues, projected expenditures, budgets and profits)projected expenditures, budgets and profits)

BASIC PRINCIPLES OF LCCABASIC PRINCIPLES OF LCCA

Clearly identify level for analysis (corporate, network / Clearly identify level for analysis (corporate, network / systems wide or project / site specific)systems wide or project / site specific)LCCA supports decisions; doesnLCCA supports decisions; doesn’’t make themt make themCriteria for decision support need to be identified Criteria for decision support need to be identified (eg., cost effectiveness, min. costs, etc.)(eg., cost effectiveness, min. costs, etc.)LCCA principles / methodology are associated with LCCA principles / methodology are associated with but donbut don’’t control financing of a projectt control financing of a projectAll feasible alternatives should be consideredAll feasible alternatives should be consideredUse a consistent life cycle periodUse a consistent life cycle periodInclude user costs if possible Include user costs if possible

COST AND BENEFIT FACTORSCOST AND BENEFIT FACTORSAgency CostsAgency Costs

Initial construction / purchase costsInitial construction / purchase costsEngineering and administration (throughout)Engineering and administration (throughout)

Future costs of maintenance / rehabilitation / Future costs of maintenance / rehabilitation / renovation / replacementrenovation / replacement

L.L.O.O.S.S.

LCLC00

Residual valueResidual value

COST AND BENEFIT FACTORSCOST AND BENEFIT FACTORS(Continued)(Continued)

User Costs User Costs -- Time delays due to work Time delays due to work

on the infrastructure on the infrastructure -- Extra operating costsExtra operating costs

-- AccidentsAccidents-- DiscomfortDiscomfort

Non User Costs Non User Costs -- Environmental pollution Environmental pollution -- Neighbourhood disruptionsNeighbourhood disruptions

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WHAT LENGTH OF LIFE CYCLE PERIOD ?WHAT LENGTH OF LIFE CYCLE PERIOD ?

L.L.O.O.S.S.

LCLC00

Type of infrastructure involved (fleet vs. roads vs. Type of infrastructure involved (fleet vs. roads vs. buildings vs. parks) ?buildings vs. parks) ?Reliability of forecasts (usage, traffic, volumes, etc.) ?Reliability of forecasts (usage, traffic, volumes, etc.) ?Agency or department policy ?Agency or department policy ?Time after which discounted costs are negligible ?Time after which discounted costs are negligible ?

METHODS OF LCCAMETHODS OF LCCA

1. Benefits / Cost Ratio1. Benefits / Cost Ratio

2. Internal Rate of Return2. Internal Rate of Return

3. Equivalent Uniform Annual Costs3. Equivalent Uniform Annual Costs

4. Cost4. Cost--EffectivenessEffectiveness

5. Present Worth 5. Present Worth

Which Method is Best for Infrastructure ?Which Method is Best for Infrastructure ?

(applicability, understanding, consistency)(applicability, understanding, consistency)

PRESENT WORTH METHODPRESENT WORTH METHOD

LCLC00 nn

PW of Costs = (Initial Costs) + (Future CostsPW of Costs = (Initial Costs) + (Future Costsin Any Year, n, x PWF) in Any Year, n, x PWF) -- (Residual Value(Residual Valueat LC x PWF) + (User Costs in Any Year,at LC x PWF) + (User Costs in Any Year,n, x PWF)n, x PWF)

where PWF = where PWF = (1 + i)(1 + i)nn

11

LCCA WITHIN CORPORATE BUSINESS PLANLCCA WITHIN CORPORATE BUSINESS PLAN

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Develop a consistent and comprehensive protocol for assessing the financial and operational impacts of using LCCA in managing the City of Edmonton’s infrastructure

PROJECT SCOPEPROJECT SCOPE

STAKEHOLDERS FOR LCCASTAKEHOLDERS FOR LCCA

A. CityA. City1. Public at large1. Public at large2. Elected council2. Elected council3. Senior administration3. Senior administration4. Technical / operating4. Technical / operating

B. Direct and Indirect ConcernB. Direct and Indirect Concern1. Province1. Province2. Associations2. Associations3. Academic3. Academic

POTENTIAL ISSUES & ROADBLOCKSPOTENTIAL ISSUES & ROADBLOCKS

1. Expectation that LCCA can1. Expectation that LCCA canresolve equity issueresolve equity issue

2. Perception that LCCA can 2. Perception that LCCA can result in budget distortionsresult in budget distortions

3. Perception that LCCA is only 3. Perception that LCCA is only a guessing gamea guessing game

4. Perception that LCCA 4. Perception that LCCA replaces decision makingreplaces decision making

5. Belief that politics will prevail5. Belief that politics will prevail

LCCA GENERIC PROTOCOL :LCCA GENERIC PROTOCOL :STRATEGIC LEVEL CONTEXTSTRATEGIC LEVEL CONTEXT

CITY COUNCILCITY COUNCIL PLAN EDMONTONPLAN EDMONTON

STRATEGICSTRATEGICLEVELLEVEL

BUDGET PLANNING PROCESSBUDGET PLANNING PROCESS •• Public inputPublic input•• Population growth forecastsPopulation growth forecasts•• Social, political, economicSocial, political, economic

and environmental issuesand environmental issuesand policiesand policies

•• Long range financialLong range financialforecastforecast

•• Service levels and fundingService levels and fundingtargetstargets

•• Ongoing monitoring ofOngoing monitoring ofinfrastructure assetsinfrastructure assets

S1 Preparation of Dept. by Dept. needsS1 Preparation of Dept. by Dept. needsover the planning horizon; estimatesover the planning horizon; estimatesof costs; prioritiesof costs; priorities

S2 Annual budget request and rolling 5 S2 Annual budget request and rolling 5 year capital planyear capital plan

OperatingOperating RehabilitationRehabilitation NetworkNetworkExpansionExpansion

Funded Capital PlanFunded Capital Plan ((UnfundedUnfunded ))

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CAN LCCA BE USED AT THE STRATEGICCAN LCCA BE USED AT THE STRATEGICLEVEL TO DEVELOP A CAPITAL PLAN ?LEVEL TO DEVELOP A CAPITAL PLAN ?

YesYes

By setting L.O.S. targets or performance standardsBy setting L.O.S. targets or performance standardsand then using LCCA in a and then using LCCA in a ““cost minimization modecost minimization mode””to estimate funding requiredto estimate funding required





Funded Capital PlanFunded Capital Plan

3. Selection of life 3. Selection of life -- cyclecycleperiodperiod

2. Budget breakdown by2. Budget breakdown byDepartmental componentsDepartmental components

1. Dept. By dept. budget1. Dept. By dept. budget(1 Year firm; 5 Year rolling)(1 Year firm; 5 Year rolling)

DATADATABASEBASE

NETWORK / SYSTEM WIDE LCCA PROTOCOLNETWORK / SYSTEM WIDE LCCA PROTOCOL

6. a) Current condition of 6. a) Current condition of infrinfr..b) Sections/areas/facilitiesb) Sections/areas/facilities

at or below min. of 5 at or below min. of 5

ContinuedContinued

4. Selection of LCCA Method4. Selection of LCCA Method

DATADATABASEBASE

5. Selection of minimum L.O.S.5. Selection of minimum L.O.S.or performance standards or performance standards


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9. a) Feasible treatments/actions to9. a) Feasible treatments/actions toaddress needs of 6b) and 7b)address needs of 6b) and 7b)

b) b) PerfPerf./service life estimates for 9a)./service life estimates for 9a)

7. a) Performance/service life estimates7. a) Performance/service life estimatesfor existing sections/areas/facilitiesfor existing sections/areas/facilities

b) Future years when a)b) Future years when a)’’s reach min.s reach min.of 5. (needs years)of 5. (needs years)

DATADATABASEBASE8. Year by year LCCA or multi8. Year by year LCCA or multi--year ? year ?

ContinuedContinued



11. a) Select discount rate11. a) Select discount rateb) Calc. costs and reduce to PW of b) Calc. costs and reduce to PW of

each treatment section/facilityeach treatment section/facilityneeds year combination needs year combination

(include M&O and users costs if(include M&O and users costs ifapplicable)applicable)

c) Calc. effectiveness/utilization ofc) Calc. effectiveness/utilization ofb)b)’’s and calculate C/E ratioss and calculate C/E ratios

d) Rank c)d) Rank c)’’s from higher to lowests from higher to lowest

10. Establish measures of 10. Establish measures of effectiveness or utilizationeffectiveness or utilization

DATADATABASEBASE

ContinuedContinued


12. a) If year by year budget, assign12. a) If year by year budget, assignyear 1 cost to 11 d)year 1 cost to 11 d)’’ss

b) When budget used up, deferb) When budget used up, deferremaining 11d)remaining 11d)’’s to Year 2 s to Year 2

DATADATABASEBASE

ContinuedContinued

13. Repeat 12 for Year 2 budget, etc.13. Repeat 12 for Year 2 budget, etc.

14. Prepare year by year recommended14. Prepare year by year recommendedprogram of workprogram of work

Program approval and implementationProgram approval and implementation





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NETWORK LEVEL LCCA EXAMPLENETWORK LEVEL LCCA EXAMPLE

266 km arterial pavement network266 km arterial pavement networkPerformance model (PQI vs. Years) = F (Performance model (PQI vs. Years) = F (subgradesubgradestrength, layer thicknesses, strength, layer thicknesses, ESALESALss))Program period 10 years; i = 4%Program period 10 years; i = 4%Trigger level PQI = 4.5 (10 to 0 scale)Trigger level PQI = 4.5 (10 to 0 scale)Treatment alternatives: mill and overlay; crack seal Treatment alternatives: mill and overlay; crack seal at 5, 10, 15 yearsat 5, 10, 15 yearsUnit costs knownUnit costs knownThree budget scenarios:Three budget scenarios:

$0 / year $0.5 M / year $1.0 M / year$0 / year $0.5 M / year $1.0 M / year

0123456789

10

1 2 3 4 5 6 7 8 9 10Years

AVE

. PQ

I

$0 Budget$500K/yr. Budget$1.0 M/yr. Budget

NETWORK LEVEL LCCA EXAMPLE RESULTSNETWORK LEVEL LCCA EXAMPLE RESULTS

NETWORK LEVEL LCCA EXAMPLE RESULTSNETWORK LEVEL LCCA EXAMPLE RESULTS

0102030405060708090

100

1 2 3 4 5 6 7 8 9 10

Years

% T

otal

< P

QI 4

.5

$0 Budget$500K/yr. Budget$1.0 M/yr. Budget

WHEN MIGHT A SIMPLIFIED LCCA BE USED ?WHEN MIGHT A SIMPLIFIED LCCA BE USED ?

1. Project or work to be done or 1. Project or work to be done or purchase is below threshold levelpurchase is below threshold level

2. Only one alternative is feasible and 2. Only one alternative is feasible and used at regularly scheduled basisused at regularly scheduled basis

3. Multi3. Multi--year spreadsheet of scheduled year spreadsheet of scheduled expenses and revenues is feasible expenses and revenues is feasible alternativealternative

$$ $$

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PROJECT LEVEL LCCA EXAMPLEPROJECT LEVEL LCCA EXAMPLE

3.0 km of 23.0 km of 2--lane heavy duty pavementlane heavy duty pavementThreshold limit for LCCA = $1.0 M for initial project Threshold limit for LCCA = $1.0 M for initial project costcostAlternative A (conventional)Alternative A (conventional)

Initial cost = $150,200 / lane Initial cost = $150,200 / lane –– kmkmExpected life = 16 yearsExpected life = 16 years

Alternative B (polymer modified)Alternative B (polymer modified)Initial cost = $159,300 / lane Initial cost = $159,300 / lane –– kmkmExpected life = 20 yearsExpected life = 20 years

PROJECT LEVEL LCCA EXAMPLE PROJECT LEVEL LCCA EXAMPLE (Cont/d).(Cont/d).

Initial cost for A = Initial cost for A = 3.0 km x 2.0 lanes x $150,200 = $901,2003.0 km x 2.0 lanes x $150,200 = $901,200

Initial cost for B =Initial cost for B =3.0 km x 2.0 lanes x $159,300 = $955,8003.0 km x 2.0 lanes x $159,300 = $955,800

Thus, below threshold limitThus, below threshold limitLife cycle period = 30 yearsLife cycle period = 30 yearsDiscount rate = 5.0%Discount rate = 5.0%Because simplified LCCA, schedule of treatments Because simplified LCCA, schedule of treatments used in LCCAused in LCCA

$194,000$194,000TotalTotal

150,200150,200400400

2,2002,20021,90021,900

11,90011,9004,0004,0007,4007,400

(4,000)(4,000)

150,200150,200470470

3,1003,10045,50045,50028,70028,70010,60010,60027,60027,600

(17,600)(17,600)

Initial Initial ConstrConstrCrack SealCrack SealPatchingPatchingRehabRehabCrack SealCrack SealMajor Major MaintMaint..Rehab.Rehab.ResidResid. value. value

003377

15151818202027273030

PW of CostPW of CostCostCostTreatmentTreatmentYearYearAlternative AAlternative A

PROJECT LEVEL LCCA EXAMPLE RESULTSPROJECT LEVEL LCCA EXAMPLE RESULTS

$183,570$183,570TotalTotal

159,300159,300370370

1,7001,70021,70021,700

2,2002,2001,8001,800

(3,500)(3,500)

159,000159,000470470

3,1003,10057,60057,600

6,8006,8006,1006,100

(15,300)(15,300)

Initial ConstInitial ConstCrack SealCrack SealPatchingPatchingRehab.Rehab.Crack SealCrack SealPatchingPatchingResidResid. value. value

0055

12122020232325253030

PW of CostPW of CostCostCostTreatmentTreatmentYearYearAlternative BAlternative B

PROJECT LEVEL LCCA EXAMPLE RESULTSPROJECT LEVEL LCCA EXAMPLE RESULTS

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TechnicalTechnical

OPPORTUNITIES FOR ADVANCINGOPPORTUNITIES FOR ADVANCINGASSET MANAGEMENTASSET MANAGEMENT

Longerlastingassets

Long termperformance

specs

Betterperformance

models

Automation

Bettercalibrationprocedures

Reliabilityapplications

Strategic-Network –

Projectintegration

Degree of Risk Ranges From High to LowDegree of Risk Ranges From High to LowExpected Payoff Ranges From Short to Long TermExpected Payoff Ranges From Short to Long Term

Economic / TechnicalEconomic / Technical


Adaptingto

privatization

Bettertechnical

capabilities

Incentiveprograms


Stability ofresearch $

$ for highrisk ideas

Objectiveoptimiz. across

assets

Quantificationof technical

payoffs

Institution and UserInstitution and User



Visual,interactive on-line AMS

AdaptingAMS toagency

Explicitrecognition ofAMS “clients”

Retainingcomponent systemsas distinct modules

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22

PASTPAST PRESENTPRESENT FUTUREFUTURE

Civil Engineers BuildCivil Engineers BuildInfrastructure on MarsInfrastructure on Mars

A LOOK INTO THE FUTUREA LOOK INTO THE FUTURE

TIME HORIZON FOR THE FUTURETIME HORIZON FOR THE FUTURE

ShortShortTermTerm

(25 Years)(25 Years)

MediumMediumTermTerm

(50 Years)(50 Years)

LongLongTermTerm

(100 Years+)(100 Years+)

REASONABLECERTAINTY UNCERTAINFUTURE

Short Term

• Need for clean water• Deteriorating

infrastructure• Population growth• Need for security• Need for effective

waste treatment / disposal

• Great to be a civil engineer

Sufficient funding?Rate of environmental degradation?Effectiveness of security?Effective succession planning?Extent of nano-technology applications?


Medium Term

Need for clean waterContinued urban growthContinued need for effective waste treatment / disposalGlobalization of technologyContinued need to transport materials and goods"Super materials"

Use of quantum computing?Population growth levels off?Start of infr. on Mars?Widespread tele-commuting?Less transport of people?Decreased use of petroleum?Glob. of water market?

Ralph86.ppt

23


Long Term

Need for clean waterNeed for human habitatNeed to treat / dispose wasteWidespread auto-mation in all Civ. Eng.Need to move people and goods (social, econ., recreational, food supply reasons)

Teleportation?Building infrastructure on other planets?Widespread use of non-conventional energy?Major conflicts over global water shortages?Replacement of most Civ.Eng. functions by robots?Extent of infrastructure gap / backlog?

FUTURE PROSPECTSFUTURE PROSPECTS

Get the message across and create Get the message across and create a a ““cultureculture”” of commitment to andof commitment to and

the means for sustainability of the means for sustainability of our infrastructureour infrastructure

Business as usual ?Business as usual ?

oror

ralph86 - university of waterloo

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