Asset Management Strategies to Optimize Transportation Investment

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Asset Management Strategies to Optimize
Transportation Investment

• By
• Prof S Khasnabis
• Wayne State University, Detroit, USA.
• Fulbright Research Scholar 2004
• Visiting Faculty, Indian Institute Of Technology
  Bombay, India
• Presentation At
• Bengal Engineering and Science University,
  Shibpore
• 29th November 2004

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United States Educational Foundation In India
(USEFI)

• Educational Information Center Affiliated with
  the Bureau of Educational and Cultural Affairs
  of the US Dept. of State.
• Promote Mutual Understanding Between People of
  India and USA.
• Educational / Cultural Exchange of Scholars
  Professionals and Students.

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USEFI Cont..

• Also known as Fulbright Commission.
• Enables Research, Lectures and Studies
• Administration of Fullbright fellowship for
  Indian and American Citizens
• Promotion of Educational exchange among
  Fulbrighters and their Communities
• Educational advising for students interested in
  higher education in US, the most preferred
  destination of Indian students going abroad.
• (approximately 75000 currently enrolled in US
  Universities)

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USEFI (Location)

• Headquarter New Delhi
• Regional Chennai, Kolkata, Mumbai
• Website www.fulbright_india.com
• Satellite Locations
• Ahmedabad, Bangalore, Hyderabad and Manipal.

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USEFI Cont.

• Autonomous body formed by the US Congress.
• 1950 Bilateral Agreement Board of Directors
• 5 from US nominated by US ambassador
• 5 from INDIA nominated by Govt. of India
• Over 7350 Fulbright Fellowships to Indians and
  Americans since 1950 (Sponsored by Dept. of
  State).
• An Additional 8000 Fellowships by other US Govt.
  Agencies.

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• Fulbright Program
• Established in 1946
• Legislation introduced by Senator J W Fulbright
• Created a large Cultural and Academic network
  world wide
• Operates in 140 countries

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• Fulbright Program Cont..
• Collaborates with
• Fulbright Foreign Scholarship Board
• US Dept. of State
• Institute of International Education
• Council for International Exchange of Scholars
• US Dept. of Education

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Asset Management (AM)

• a) A Systematic Process Of Infrastructure
  Management
• Constructing
• Maintaining
• Upgrading
• b) Organized Approach Of Investment Decision
• Sound Engineering Techniques
• Robust Economic Principles
• Uncertainty and Risk of Investment

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Asset Management

• Private Industry
• Public Sector
• Public Private Partnership
• A Broad Emerging Field
• Forerunners
• Australia
• France
• New Zealand
• UK
• USA
• Singapore
• Hong Kong
• India

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Objectives

• Develop an Analytic Framework to test AM
  Strategies
• Identify Transportation (Infrastructure) Progress
• Identify data needs
• Collect Data
• Conduct Preliminary Analysis

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Past and Current AM Projects at Wayne State
University

• Transit Fleet Management ( Project-1)
• Nationwide Need1.5 billion/year
• Michigans Role
• 85 Agencies
• 8020 Federal Local Funds
• Question Purchase Vs Rehabilitation
• Vs Remanufacturing(?)

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Project 1Cont

• Two Sequential Models
• Model1 Distribute Resources Among Three
  Programs
• 1.To Minimize Total Cost Subject to
  fleet life
• and other constraints
• Or
• 2.To maximize fleet life subject to budgetary
  and other
  constraints

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Model2 Allocate Resources(Model1 Output)
Among Agencies to Maximize Remaining
Life, Subject to different
Constraints Funded
By US Dept. Of Transportation

University Of Wisconsin
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• Model 1
• Objective function
• Maximize Weighted Fleet Life
• (X1l1)SX (X4l4)SX
• Subject to
• C1X1 .. C4X4 lt Budget
• SX Demand (for new buses)
• Xi gt 0 (non-negative)

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• Model 2
• Uses Model 1 results and the current age
  distribution
• of the fleet in terms of remaining life (RL)
• RL amount of life left until MNSL
• Concept
• As REPL/REHAB/REMANF buses are added to the
  fleet the distribution changes, increasing the
  weighted average remaining (WARL) life of a bus
  in the peer group

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• Model 2
• WARL
• Health Index for peer group
• Medium sized range
• 0 lt WARL lt 7
• Taken as the weighted average of the entire
  distribution matrix

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• Model 2
• Existing Weighted Average Remaining Life
  (EWARL), similar to WARL but at the agency
  level
• Optimization Based on premise that the EWARL
  will increase as REPL/REHAB/REMANF are added to
  agencies fleets

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• Model 2
• Addition will result in a New WARL (NWARL) for
  the agency
• Therefore, objective function will be to
  maximize the sum of the NWARL for all the
  agencies
• Constraints will be from Model 1 results and
  additional user constraints

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• Application
• Peer Group of 93 agencies (1, 2..93) (similar to
  actual data in Michigan)
• Total fleet size of 720 medium buses
• Has 235 buses with RL of 0 years, at 81,540/bus
  19.16 M
• Budget projections from MDOT.

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• Application
• Only have funds for 71 buses, 5.79 M
• Same four programs described earlier
• 7 year planning horizon
• Must first allocate funds among four programs
  for first year.

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• Model 1 Results
• For 5.79 M, the 235 bus demand can be satisfied
  by
• Replacement (REHAB 1)(2 yrs) 107 buses
• Remanufacture (REMANF)(4yrs)128 buses
• Now must allocate program funds among remaining 6
  years while accounting for maturation.

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• Model 1 Results
• For 7 year projection must adopt policy
  directives to address limited additional life
• A vehicle can only be rehabilitated two
  consecutive times
• A vehicle can only be remanufactured one time
• Can rehabilitate then remanufacture

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Model 1 Results
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• Model 2
• EWARL for each agency is shown
• TEWARL 225.23 years, before any allocation
• Can only give 107 REHAB 1 and 128 REMANF
• Can not have any expansion buses
• WARL for the peer group 2.68 years (entire
  matrix)

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Distribution of RL Before Allocation
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• Model 2 results
• WARL for peer group 3.69 years
• TNWARL 376.72 years
• Each agency has a new individual EWARL
  (termed NWARL)
• All buses with RL 0 years are replaced

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Distribution of RL After Allocation
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• Evaluation of Proposed Strategy
• Based on improvement proposed strategy brings to
  fleet compared to current practice
• Measured fleet quality by WARL (Health Index)
• Method Convert WARL into dollar value and
  compute Net Present Worth

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Current Practice Projection
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Comparative Analysis WARL Current Practice vs.
Proposed Procedure
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Comparative Analysis Net Present Worth
Calculation

• Present Worth of Savings 20,969,440
• Present Worth of Deficit 9,257,095
• Net Present Worth 11,712,345
• Positive value implies initial deficits are
  compensated by higher quality of fleet

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• Observations
• Able to satisfy bus replacement needs through
  means other than new buses (can be used for any
  size bus)
• Able to distribute funds among agencies
• Able stay within budget
• Able to provide higher quality of fleet
  compared to current practice

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Project 2Safety Improvement for Urban Arterials
in SE Michigan

• Nationwide over 40,000 fatalities/yr (US)
• Estimated Loss 250 billion plus/yr
• Michigan (11 million population) has its own
  share
• Focus Area Urban intersections in SE Michigan
  (Over 50 of states population)

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Project 2 Cont

• Questions to be investigated
• How should safety investments be made(?)
• What type of improvements(?)
• What analytic technique(?)
• Development of Guidelines
• Funded by
• Michigan Department of Transportation

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Map of Detroit Metro Area
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(No Transcript)
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Project 3 Public Private Partnership on A
Complex Multidirectional Project

• Project Description
• 1. A third river crossing between Detroit
• (MI,USA) and Windsor (Ontario, CA)
• 2.A large number of agencies involved
• 3.Largest Trade Corridor, between USA and
  CANADA
• 4. NAFTA Consequences
• 5.Need for 3rd Crossing
• 6.Capacity Vs Customs Problem
• 7.High Truck Percentage and High Truck
  Traffic
• 8. Border Security

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Project 3 Cont

• Location(?)
• Bridge Vs Tunnel(?)
• Who will Build Own and Prepare(?)
• Private Industry Very Little Precedence
• State Reluctant to Invest (250m)
• BOOT Approach is suggested
• Long Term Revenue
• 
  Funded By
• Wayne State Univ. Center of
  Legal Studies

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Typical BOOT Corporate Structure
Source Financing and Managing Infrastructure
Projects by Merna and Nirju, Asia Law and
Practice
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Typical Project Cashflow for BOOT Projects
Source Financing and Managing Infrastructure
Projects by Merna and Nirju, Asia Law and
Practice
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Michigan Transportation State AM Council

• 11 member Council established by the state
  Legislature
• Members Those who own Roadway Infrastructure
• Michigan State DOT
• 83 Road Commissions
• 535 Cities/ Townships
• A total of 619 separate agencies
• 62 of agencies own less than 25miles
• 225 agencies own less than 10miles

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Michigan Transportation AM Council

• Council to make Necessary Recommendations on
  Future Pavement and Bridge Investment Decisions
• Legality may Need to be Tested in Court

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Potential Projects In India

• Mumbai-Pune Toll Expressway
• Bandra-Worli Sea Link
• MUTP/World Bank Projects
• Frame work to encourage Private participation
• DMRC Program

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Acknowledgement

• Wayne State University Group
• Prof. R.D.Ellis
• Prof. P.A.Brinkman
• Joe Bartus, M.S Student
• Lori Goe Prez. Student
• Dr. K.Kar, Post Graduate Fellow

• Transportation Systems Engineering (TSE) Group,
• Indian Institute of Technology, Bombay
• Prof. S.L.Dhingra
• Prof. K.V.K. Rao
• Prof. V.M.Tom
• Sabyasachee Mishra, M.Tech Student

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• THANK YOU