Quantify the Benefits of Implementing Asset Management

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Debra Bradford
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Management August 6, 2005 Daisuke MIZUSAWA and Sue MCNEIL College

1 1 st Annual Inter-university Symposium on Infrastructure Management (AISIM) Quantify the Benefits of Implementing Asset Management August 6, 2005 Daisuke MIZUSAWA and Sue MCNEIL College of Urban Planning and Public Affairs University of Illinois at Chicago, USA 1

2 Overview Background Objective Benefits and Costs of AMS Implementation Research Question Analysis Methods Framework Conclusion 2

3 Background Barriers to implementing AMS: Existing legacy data system Organizational issues Technological issues Lack of educational tools Costs Upper-level managers need: To justify agencies investment in AMS tools Methods to quantify benefits to justify AMS implementation using public resources. Quantify the benefits of AMS implementation Demonstrate the benefits exceed the implementation and operating costs. 3

4 Objective Quantify benefits of AMS implementation. Identify various benefits and costs. Review methods to quantify benefits of AMS implementation and other infrastructure evaluation. Develop a framework of quantifying and evaluating benefits of AMS implementation. 4

5 Benefits and Costs of AMS Implementation Literature Review Benefits Elected representatives: receive strategic benefits Agencies: achieve goals, maximize assets performance, minimize expenditure, and maintain assets Public: use infrastructure without any risks and costs. Costs Direct costs (data acquisition, system installment, system development and operation) Indirect costs (labor, material, fixed costs) 5

6 Benefits and Costs of AMS Implementation Literature Review No rule of thumb to quantify benefits. Several researchers used different methods which have limitations in counting whole benefits. E.g., qualitative benefits: communication, satisfaction, externalities Costs are easier to quantify than benefits. 6

7 Research Question 1. Do the benefits of implementing AMS exceed implementation and operating costs? 2. Does an agency increase productivity and decrease costs with AMS? 3. Do the public realize user and external cost reduction due to AMS implementation? 7

8 Analysis Methods Literature Review Before and After Analysis Smadi PMS Weinberger Transit Gillen et al. ITS Cowe Falls and Tighe Hudson PMS et al. PMS Ran et al. ITS Regression Analysis Benefit-Cost Analysis 8

9 Before and After Analysis Compare agencies performance such as asset condition, benefits, and costs before and after PMS implementation. Smadi, Cowe Falls and Tighe, Hudson et al. before after PMS 9

10 Regression Analysis Model relationships among variables and provides degree of independent variables influences on dependent variables by coefficients. y = f (x1, x2, x3, ) Weinberger, Gillen et al. and Hudson et al. 10

11 Benefit-Cost Analysis Evaluate cost-effectiveness of a program Whether benefits produced by a program exceed its costs. Net Benefit = benefit cost Benefit-Cost Ratio = benefit/cost Ran et al., Cowe Falls and Tighe, and Hudson et al. 11

12 Pros and Cons Before and After Regression Benefit-Cost Pros Can use common measurement Require minimal data Specify what kind of and how much independent variables influence dependent variable Can consider various changes Show analysis result using monetary value Address how much benefits exceed costs with net benefit Cons Cannot consider various changes Require a number of variables to show pattern of relationship among variables Need to determine appropriate dependent variable There is no consistent manner to calculate benefits and costs

13 Framework Build a generic method for quantifying the benefits. Focus on PMS as a preliminary experiment Triangulate the three methods to obtain richer insight into PMS implementation. 13

14 Descriptive Analysis (Before and After) Recognize trends of agency s profile, performance and exogenous effects. Employ multiple indicators Analyze the second question. 14

15 Regression Analysis Observe the degree of independent variable influences on dependent variable expressed by the coefficients. Articulate answers to the second question. Needed to find: adequate independent and dependent variables. the best type of regression model. 15

16 Benefit-Cost Analysis Answer the first question and where possible the third question. Conduct two analyses: Retrospective analysis for an agency which has already implemented PMS. The effect of PMS and the degree of conformity of agency s business to M&R program made by PMS Prospective analysis for an agency where there is no PMS. The effects of PMS only 16

17 Issues Data availability Data quality Valuation method for user costs Simulation Analysis result 17

18 Conclusion Addressed a direction to quantify benefits of AMS implementation. Before and After Analysis Regression Analysis Benefit-Cost Analysis Required to apply the framework to other AMS applications. Start the PMS experiment in fall 2005, and then discuss the feasibility of utilizing the method for other assets. 18

19 Retrospective Analysis Agency M&R Cost w/o User A B M&R Cost w/ User Cost w/o User Cost w/ PMS Costs PMS Implementation Retrospective Analysis A+B PMS Benefit = (M&R Cost w/o M&R Cost w/ ) + (User Cost w/o User Cost w/ ) (Present) Years Prospective

20 Prospective Analysis Agency M&R Cost w/o User A B M&R Cost w/ User Cost w/o User Cost w/ PMS Costs PMS Implementation (Present) PMS Benefit = (M&R Cost w/o M&R Cost w/ ) + A+B (User Cost w/o User Cost w/ ) Years Prospective Analysis

Project 06-06, Phase 2 June 2011

ASSESSING AND INTERPRETING THE BENEFITS DERIVED FROM IMPLEMENTING AND USING ASSET MANAGEMENT SYSTEMS Project 06-06, Phase 2 June 2011 Midwest Regional University Transportation Center College of Engineering