Life Cycle Cost Analysis for Pavements: Background & History

Transcription

1 Life Cycle Cost Analysis for Pavements: Background & History ACPA LCCA Workshop Knickerbocker Hotel Chicago Illinois June 24, 2014 Leif G. Wathne, P.E.

2 Talking Points What is LCCA? What LCCA is not. History. Where are we now?

3 What is LCCA? Life-Cycle Cost Analysis is a process for evaluating the total economic worth of a usable project segment by analyzing initial costs and discounted future costs, such as maintenance, user, reconstruction, rehabilitation, restoring, and resurfacing costs, over the life of the project segment. Source: Transportation Equity Act for the 21st Century

4 What is LCCA? An economic analysis tool for competing alternatives for a single project Equates present and future cost streams of each alternative, taking into account both: 1) effects of inflation, and } Discounting 2) effects of interest rates on project expenses over the life of the project.

5 What is LCCA? Proven economic analysis technique Based on well-founded economic principles Taught in Economics and Civil Engineering programs at the University level

6 What is LCCA? Compares only differential costs Requires equal benefits (i.e. same level of service over analysis period) Project level-analysis decision has already been made to build the project!

7 Why use the LCCA approach? Make better transportation investment decisions Assist in determining the lowest cost way to meet the performance objectives of the project. Dwindling resources and reduced purchasing power makes the employment of LCCA even more critical.

8 What LCCA is NOT LCCA is not: A cost benefit analysis! A magic black box (there is no asphalt LCCA or concrete LCCA) Complicated no computer required (but helpful though ) A decision in and of itself (it is a decision support tool)

9 What LCCA is NOT LCCA is not: About advantaging one industry over another Materials specific technology About selecting pavements at the federal level

10 Life Cycle Cost Analysis HISTORY & BACKGROUND

11 History of LCCA Manual of the Principles and Practices of Road Making, Gillespie 1847 Defined the most cost-effective highway project as the one with the highest return to the cost associated with its construction and maintenance Concepts not widely used until 1950s and 1960s, the beginning of

12 AASHO 1960 Guide on Pavement Type Selection V. Cost Comparison: Where circumstances permit, a better and more realistic measure would be the cost on the basis of service life or service rendered by a pavement structure. Such cost computation should reflect original investment, anticipated life, maintenance expenditures, and salvage value.

13 AASHO 1960 Guide on Pavement Type Selection It does caution however: Original cost can be fairly accurately estimated. Doubt as to validity arises in the case where on(e) type of pavement has been given monopoly status by the long-term exclusion of a competitive type.

14 AASHTO 1972 Pavement Design Pavement Design Guide Recommended the concept of life cycle costing Builds and refers to 1960 AASHO guide Carries to AASHTO 1983 and 1993 Design Guide recommendations endorsing LCCA use as a means for economic evaluation and decision support tool.

15 FHWA 1981 Pavement Type Selection Policy Statement 2. Pavement type determinations should include an economic analysis based on life cycle costs of the pavement type. Estimates of life cycle costs should become more accurate as pavement management procedures begin providing historical cost, serviceability, and performance data.

16 FHWA 1981 Pavement Type Selection Policy Statement (cont.) 3. An independent engineering and economic analysis and final pavement type determination should be performed or updated a short time prior to advertising on each pavement type being considered.

17 MSDOT/FHWA Pavement Selection based on Life Cycle Cost 84 Examined actual life cycle costs of 36 different pavement (HMA, JPCP, CRCP) built since Sometimes asphalt pavements have been selected because they have a lower initial cost with the reasoning that the money saved can be spent on other projects or to pave additional roads; this can lead to a poor choice when future expenditures are also considered. Conclusion: The results show that in the long run the jointed concrete pavements have the lowest average 1984 life-cycle cost per mile since 1960.

18 1991 ISTEA (Highway Bill) Section 1025 State planning process.. shall at a minimum consider: the use of life cycle costs in the design and engineering of bridges, tunnels, or pavement

19 1994 Executive Order Principles for Federal Infrastructure Investments. Required that Federal Infrastructure spending decisions be based on a systematic analysis of benefits and costs measured and appropriately discounted over the full life cycle of each project.

20 1994 USDOT OIG Report on Cost Comparison of Asphalt and Concrete Concluded that PTS process approved by FHWA (R4) did not include required LCCA. Pervasive non-compliance with regulations FHWA lacks assurance that projects totaling $1.3B were cost effective

21 NHS Designation Act of 1995 Section 303. Quality Improvement Required States to conduct a life-cycle cost analysis of each usable project segment on the National Highway System (NHS) with a cost of $25 million or more. Did not rescind ISTEA requirements (FHWA 1996)

22 1996 FHWA LCCA Policy Statement Establishes LCCA principles to be applied by FHWA in infrastructure investment analyses, and provides a framework that States may use in conducting LCCA as required in Section 303 of the National Highway System (NHS) Designation Act of ISTEA requirement still in effect

23 1998 TEA-21 Section 1305 (c) Life Cycle Cost Analysis The Secretary shall develop recommendations for the States to conduct life-cycle cost analyses... based on the principles contained in section 2 of Executive Order No The Secretary shall not require a State to conduct a life-cycle cost analysis for any project as a result of the recommendations required under this subsection.

24 1998 FHWA Interim Tech Bulletin Broad fundamental principles as well as detailed procedures Introduces probabilistic approach Demo Project 115 :LCCA in Pavement Design Foundation of later FHWA LCCA guidance and tools including RealCost (2004)

25 NCHRP 2011 Pavement Type Selection Developed process for pavement type selection PTS purpose: provide the maximum utility value for taxpayers and facility users over a predetermined design and analysis period LCCA is integral part of process (Chapter 4)

26 MAP-21 LCCA Provisions GAO Study requested: best practices for calculating lifecycle costs and benefits for fed funded hwy projects Section 1106: State Asset Mgmnt Plan to include: Life Cycle Cost and Risk Management Analysis. Awaiting FHWA rulemaking New Value Engineering threshold

27 2013 GAO Report to Congress Federal government has an acute interest in helping states use LCCA to make cost-effective decisions when investing federal-aid highway funds. Reviewed best practices (16 states) Assessed conformance with GAO Cost Guide s best practices. Variable practices, update guidance

28 Life Cycle Cost Analysis WHERE ARE WE NOW?

29 Where are we now? FHWA does not require LCCA for federal aid projects, but does encourage! Industry supports LCCA adoption ACPA LCCA Engineering Bulletin ACPA LCCA Perspectives Position StreetPave12 NAPA LCCAExpress LCCA Webinars, workshops, etc. Everyone supports

30 Who is using LCCA? South Carolina DOT SPR 656 ( 08) 33 states and 2 provinces responded...

31 Legislatively mandated: MI, IL, MN [Mack 2014]

32 LCCA Current State of Practice AASHTO Supports FHWA Supports Congress Supports State DOTs broadly support Wide variation in use Inform or support decision? Industry supports EVERYONE supports but not required!?!

33 How LCCA Works