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White Paper #6
The Other P3: Properly Prioritizing Projects
A White Paper by LifeSpan Technologies
All too often, we hear the same tune from key engineering executives at State DOTs – “If only the elected officials would leave us alone, we could do a much better job prioritizing major expenditures.” Did you ever wonder if that was true?
We agree with the DOT engineers who say they can better prioritize simply because they have more information, although often subjective, to assess the impact of major expenditures on users across their state. But the engineers are still hampered when they rely solely on the results from visual inspection to set bridge repair or replacement spending priorities. You simply cannot start with subjective information and expect outcomes that have been objectively optimized.
We have a much more effective solution in mind and it’s ready to implement.
What is Optimal Spending?
Nearly all organizations want to achieve the biggest “bang for the buck” when they decide to spend/invest for almost any reason. Call it human nature, but we all recognize that a dollar well spent can bring more back in terms of value, whether it’s for basic necessities of life, recreation, children’s education, or even replacing a worn out bridge. There’s a lot to be said for frugal, well thought out, optimized spending, especially when the numbers get large.
ExxonMobil is famous for their comprehensive processes to analyze and prioritize all capital expenditures (CAPEX). It includes a well-defined strategy, statement of need or opportunity, a very tight cost estimate, identification of key cost variables, running “what-if” scenarios to examine how changed key variables may impact the cost, and finally the calculation of a return on investment. ExxonMobil has elevated this process to an art form, to the benefit of the corporation and its shareholders.
The Board of Directors of ExxonMobil makes the final CAPEX decisions, after much debate and questioning, which speaks to the importance of this process. This substantial effort ensures that shareholders get the highest possible return for their investment in ExxonMobil year after year after year. We suspect GE, CSX, Caterpillar, and Apple use similar decision processes, fully expecting to maximize long-term shareholder returns.
Most State DOT engineers understand the capital allocation process, but stumble when state elected officials get involved because those elected officials have different spending objectives. Unfortunately, elected officials would still rather cut ribbons on new bridges, and not tout how they saved precious taxpayer funds by keeping old bridges in service.
Why Clear Spending Objectives Matter
Corporations strive to maximize their return on invested capital. But that’s not necessarily the case with elected officials who want their voice – and often only their voice – heard on spending. We think the answer to this problem may be in setting and maintaining clear spending objectives for an organization, especially for public agencies during this era of limited funding.
It’s nearly impossible to calculate a return on invested capital for a state DOT, simply because the return on a new highway or bridge cannot be easily reduced to dollars and cents. Toll operations or transit agencies can conduct that type of accounting, but typically not a state DOT, county, or city. This makes optimized spending more difficult, but it’s not impossible.
We advocate the use of two very distinct, but complimentary objectives to optimize public transportation spending; the first and primary objective should be risk reduction/elimination and the second objective should be to maximize the economic impact.
Maximizing safety for transportation users is widely acknowledged to be the primary concern for DOTs and Transit Agencies across the county. So we’re starting with an objective that most everyone agrees should be the key consideration for where and when to spend limited funds.
The key issue for public agencies is the identification and quantification of risk that should be minimized or eliminated. That process takes a significant amount of organizational and industry experience and integration of data that isn’t normally done on a routine basis, such as the frequency of traffic accidents on a functionally obsolete bridge, or whether certain visible defects on a bridge are actually impacting structural integrity.
We know that the term structurally deficient bridge has more inflammatory overtones than its usefulness as a practical guidepost for a replacement project. DOTs across the US have spent thousands of man-hours explaining to the public and press that this classification does not mean that a structurally deficient bridge may collapse the next time someone goes over it. Yet various interest groups continue to lobby for dramatically increased funding to remedy this situation as if every bridge with that classification must be replaced before the next heartbeat.
While there are obvious risks associated with fracture critical and deteriorated bridges, that risk is not a sufficient reason to wholesale raid the taxpayers’ collective wallets. We advocate the judicious use of structural monitoring technology to minimize risks associated with those bridges, but also to Safely Extend Asset Life™, saving limited funding for other projects that have a higher return in terms of risk reduction or economic impact.
And what we advocate for the economic impact objective is straightforward. For example, safely removing an unnecessary load posting helps farmers, first responders, truckers, school buses and other users by avoiding costly long detours that waste precious time, burn more fuel, contribute to air pollution, and possibly cause collateral damage to other bridges. Other economic impacts might include the ability to safely carry increased loads (greater than 40 tons) on certain highway corridors such as the National Highway System (NHS), which includes the Interstate System and major state routes.
What we don’t consider to be sensible spending decisions in this era of limited transportation funding are projects that are mostly appearance related, such as sidewalks, flowers, and fancy walking trails. If a state DOT or county has serious safety concerns with certain roadways or bridges, we don’t believe spending for flowers makes any sense. We can buy all the tulips in Holland after we have sufficiently upgraded our transportation infrastructure.
Implementing Changes to Better Prioritize Spending
We can just hear the DOT engineers now: “You don’t know how difficult it is to get something like you suggest implemented.” Well, we have a straightforward response that should be useful for DOT executives and engineers alike: “It won’t happen if you don’t get started.”
Changing how an organization manages its spending is fully supported by the MAP-21 transportation legislation that Congress implemented two years ago. Given that Congressional emphasis, we conclude these changes are worth implementing, especially since state DOTs are daily stewards of the taxpayer’s funds.
It’s not enough these days to blindly follow procedures or processes that have been in place for many decades, —“worst first”,” or base spending prioritization solely on the results of visual inspection – “it just doesn’t look right anymore.” Today’s weary taxpayers deserve better.
It’s time for State DOTs and transit agencies to move into the 21st century and update their outdated processes and procedures. Importantly, we don’t for a minute suggest that DOT staff is the main problem. Rather, if they were given more organizational freedom and support to innovate and rapidly adopt advanced technologies for assessing the condition of bridges, we think a transportation renaissance could be right around the corner.
We urge State DOTs and Transit Agencies to embrace the changes that are on their doorstep – ready for adoption. MAP-21 Asset Management (AM) is a big step for many DOTs, but it holds tremendous promise for optimized spending and outsized returns for US taxpayers. And there are highly skilled and dedicated practitioners of AM who are willing and able to help DOTs implement the necessary process and procedural changes.
Another example is the adoption and routine use of advanced certain condition assessment technologies. Early adopter DOTs and private industry have already saved millions of dollars in unnecessary spending because they used these technologies in a timely manner. Again, there are experienced firms in the US who can help state DOTs successfully implement these advanced technologies for optimizing limited repair and replacement budgets.
Change is always difficult. But, change is the one constant in our economic system that continues to deliver spectacular, lasting results. It’s time for transportation agencies to prioritize projects for the benefit of taxpayers, no matter the organizational changes required to produce the results.
For more information, contact LifeSpan Technologies on the Web at www.lifespantechnologies.com,
or by calling 770-234-9494.