Industry Insights

Asset Management is the Key to Preservation

Howard "Butch" H. Eley, Chief Executive Officer for Infrastructure Corporation of America, discusses the successes behind asset management.

Infrastructure is a vital part of the new economic stimulus package, and while the $48 billion in immediate, new transportation projects is essential to our economy and to the public safety, we also must focus on the preservation and maintenance of the system we have. America's Interstate system, which first came into being more than 50 years ago and represents billions of dollars in federal and state government investment, is critical to our economic success and to our way of life.

Like any asset, our roads and bridges will naturally deteriorate faster as they age. The longer we defer routine and needed maintenance, the faster our roads and bridges will decline and the more it will eventually cost to fix them.

In recent years, many governmental agencies have initiated comprehensive programs to bring an asset management approach to maintaining such valuable public assets. An asset management approach factors in an asset's total life cycle as part of the maintenance decision-making process. It is an approach that is being utilized in such industries as wastewater, airline and utilities, where it makes good economic sense to perform necessary maintenance now, before existing assets deteriorate to the point of major repair and before construction costs escalate.

Only in the last decade has this approach taken hold relative to roads and bridges. It is a new industry focused on performance-based projects with longer-term contracts. Tremendous alignment is created between state transportation agencies and contractors with the single act of procuring maintenance services via multi-year contracts instead of annual ones. Under 5- and 10-year contracts, asset maintenance contractors have a built-in incentive to consistently provide a high level of service throughout the term, avoiding the "patch-it" mentality inherent in short-term contracts. This incentive creates a life-cycle approach that is aligned with true asset management.

Consider Florida, which began shifting routine maintenance activities for highways and bridges to long term, performance-based, fixed-price, asset management in 2000. Since that time the state has cut its maintenance costs 15 to 20 percent. That translates into millions of dollars saved, while miles of roads and bridges have been maintained at a high level. By 2010, all of Virginia's interstates will be under private asset management for maintenance-streamlining work and saving considerable dollars. These results are too strong for other states to ignore.

Private-sector asset management contractors focus on overall maintenance-rating goals and specific maintenance ratings for various activities. No longer is it a question of how much should be spent on maintenance on an annual basis; rather, the emphasis is on outcome, and the private sector is at liberty to use best practices to attain the goal of maintaining asset value. The asset management company's financials are directly affected when performance falls below the agreed-to condition ratings. The outcome, not the input, becomes the focus.

Maintenance done sooner rather than later is simply more efficient. Public officials should move strategically and innovatively to ensure that the great transportation investments of the past and of the present continue to serve future generations.