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Valuating Pavement Assets

Description:

As transportation agencies become more mature in managing highway assets, the value of each asset becomes critical to the process of fund allocation and strategic engineering. Such decisions must consider the current and future asset value, both in terms of the Depreciated Replacement Cost (DRC) to the agency and in terms of the value to users. Pavements are among the most valuable highway assets. Pavement management systems provide an opportunity to evaluate the return on investment from various system preservation strategies, in terms of future pavement condition metrics. However, agencies will also benefit from understanding the return on investment in terms of DRC and user value. Such financial terms allow for decision makers to understand the impact of decisions alongside other assets.

The American Association of State Highway and Transportation Officials (AASHTO) Transportation Asset Management Guide provides guidance to establish the Depreciated Replacement Cost (DRC) valuation in line with the GASB 34 Modified Approach. Such methods include assumptions regarding construction costs and depreciation which can significantly affect the resulting values. A set of standard protocols must be established which provide detailed methodologies for transportation agencies to define pavement asset value in a repeatable manner, both in terms of agency value and user value.

Many transportation agencies maintain highway construction cost information which is useful in estimating future DRC. State and local agencies should be surveyed to understand the types and quality of construction cost data which can be expected for use in standard calculations. The proposed valuation protocols should consider the available data, and provide distinct terms and calculation methodologies, to allow agencies with minimal inventory information and data-rich agencies to calculate standard estimates which utilize all available relevant data.

Objective:

To develop standard calculation methodologies to characterize the asset value of pavements for use in funding allocation, life cycle cost analysis and engineering evaluation. Resulting protocols will be proposed as provisional AASHTO standards. This set of protocols will help agencies calculate the “whole life cost” and financially quantify the return on investment in a standard manner.

Benefits:

Many transportation agencies maintain highway construction cost information which is useful in estimating future DRC. State and local agencies should be surveyed to understand the types and quality of construction cost data which can be expected for use in standard calculations. The proposed valuation protocols should consider the available data, and provide distinct terms and calculation methodologies, to allow agencies with minimal inventory information and data-rich agencies to calculate standard estimates which utilize all available relevant data.

Sponsoring Committee:AKT10, Pavement Management Systems
Research Period:12 - 24 months
Research Priority:High
RNS Developer:Nathan Moore
Date Posted:02/10/2016
Date Modified:02/16/2016
Index Terms:Asset management, Pavement management systems, Return on investment, Depreciation, Costs, Transportation departments, Standards, Valuation,
Cosponsoring Committees: 
Subjects    
Highways
Maintenance and Preservation
Pavements
Planning and Forecasting
Finance

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