Communicating and applying asset value is addressed in Chapter 8. For more detailed information, please refer to the chapter.
This is the most fundamental question one might ask about asset value. That is, given an inventory of assets, what exactly is their value? Typically, one seeks to answer this question at a high level, such as for all pavements on the NHS, rather than for specific assets. However, even at a high level it helps put all of an agency’s TAM decisions into perspective, establishing the importance of focusing on inventory maintenance. Further, answering this question supports compliance with Federal regulations requiring State DOT TAMPs to detail the value of NHS pavement and bridges. While the Federal requirement is to calculate current value, one may seek to calculate further historic value and/or predicted future value given a set of assumptions about asset funding, use, deterioration and other parameters to provide further context for TAM decisions.
Unit replacement costs are established by asset class/component using expert judgement and/or industry defaults.
Unit replacement costs are established through a one-time analysis of project data and updated in subsequent years based on inflation.
Unit replacement costs are established through a well-documented process that includes: analysis of project data; assessment of how assets should be grouped for analysis (e.g., by system, material and/or surface type); and a defined update cycle (e.g., once every 1 to 2 years).
Asset purchase or construction and reconstruction are included in the asset value calculations. Supplemental analysis is not performed to consider inclusion of other treatments.
An analysis is performed to determine what treatments to include in the analysis, and what treatments are assumed to occur based on the agency’s life cycle strategy. The analysis is conducted separately from establishing asset life cycle strategies.
An analysis is performed to determine what treatments to include in the analysis, and what treatments are assumed to occur based on the agency’s life cycle strategy. The analysis is conducted as part of the development of asset life cycle strategies and/or strategies are updated as appropriate following the analysis.
Asset age is not well established. Costs by asset class are calculated by year and depreciated without associating costs to specific assets.
Asset or component age is known or can be estimated based on inventory and treatment data, supporting calculation of depreciation at an asset class, asset and/or component level.
Asset age or component age is known or can be estimated based on inventory and treatment data. An analysis is performed of the consumption of asset benefits. A custom pattern of benefit consumption is used if supported by the analysis. Depreciation is calculated based on the selected approach by asset class, asset and/or component.
Asset value is calculated for major assets at an aggregate level as required to support financial reporting and TAMP requirements.
Asset value is calculated for major assets. Either the calculations are performed at an asset/component level or supplemental analysis is performed to confirm use of the approach for aggregating asset value calculations.
Asset value is calculated for major assets. Either the calculations are performed at an asset/component level or supplemental analysis is performed to confirm use of the approach for aggregating asset value calculations. Sensitivity analyses are periodically conducted to show the effect of changes in key analysis parameters.
Asset value is reported in agency documents, including financial reports and the agency’s TAMP, but approaches used in different documents may be inconsistent.
Asset value is reported in agency documents, including financial reports and the agency’s TAMP. Discrepancies between different estimates are documented.
Asset value is reported in a consistent manner in different agency documents, including financial reports and the agency’s TAMP. Multiple approaches for reporting value are used as needed to maintain consistency between documents while satisfying reporting requirements.
Establishing overall asset value for each asset classification is a prelude to this follow up question. Here, one seeks to determine how much value is lost each year as assets age, and what investments are needed to offset depreciation and optimize the assets’ lifespans. Value is preserved or restored as a function of the treatments performed on existing assets, or as new assets are constructed. As in the case of the first question, asking and answering this question helps put TAM decisions into context. It helps justify whether a given set of TAM investments are defensible. Information on the cost to maintain asset value can guide an agency to establish the necessary level of investment for preserving its existing assets. Also, answering this question supports compliance with the Federal TAMP regulation, which requires that State DOT NHS TAMPs document the cost needed on an annual basis to maintain value of NHS pavements and bridges. One can compare this cost to an agency’s planned expenditures to establish whether asset value, and by extension asset condition, is expected to increase, decline or remain the same.
Neither historic costs nor asset age can be reliably obtained at an asset level. Overall expenditures by work type and system are used as the basis for calculating asset value without relating expenditures to specific assets.
An asset inventory is available detailing asset age. Historic costs are not reliably tracked by asset but can be estimated using unit replacement costs and asset age
Actual costs of construction/asset purchases are tracked by asset.
The analysis is limited to asset purchase or construction and reconstruction. Asset reconstruction is assumed to have the same cost and effect as initial construction.
Treatment costs are established through a one-time analysis of project data and updated in subsequent years based on inflation. Treatment effects are based on expert judgement or a one-time analysis.
Treatment cost and effects are established through a well-documented process that includes: analysis of treatment data; assessment of how assets should be grouped for analysis (e.g., by system, material, and/or surface type); and a defined update cycle (e.g., once every 1 to 2 years).
Condition data are sufficient for estimating the condition distribution at a network level. Condition is mapped to effective age and depreciation is calculated by asset class based on current condition.
An assessment is performed to determine how best to calculate effective age, potentially using actual age and/or condition. Depreciation is calculated based on effective age by asset class, asset and/or component.
An analysis is performed of the consumption of asset benefits. A custom pattern of benefit consumption is used if supported by the analysis. Otherwise, an assessment is performed to determine how best to calculate effective age, potentially using actual age and/or condition. Depreciation is calculated based on the selected approach by asset class, asset and/or component.
The agency prepares a balance sheet as part of its financial reporting, but does not attempt to reconcile asset value in the financial report with TAM estimates.
Differences in approaches between financial reporting TAM asset valuation are documented as a one-time exercise performed when preparing the TAM asset valuation.
Consistent approaches are used where possible to prepare the balance sheet in the agency’s financial report and value assets for TAM. Differences in approaches are resolved where possible, and regularly reviewed and documented in financial and TAM reports where they remain.
The cost to maintain current asset value is calculated using annual depreciation and reported in the agency’s TAMP.
The cost to maintain current asset value is calculated using the agency’s management systems. The cost to maintain and ASR are reported in the agency’s TAMP.
The cost to maintain current asset value is calculated using the agency’s management systems. The cost to maintain and ASR are reported in the agency’s TAMP. The cost to maintain and ASR are reviewed when establishing asset investment levels.
This question is closely related to the second question, but the two questions may have different answers. If the measure of value is meaningful, then an agency should ideally spend enough money to maintain or increase asset value over time. However, it is inevitable that the value of a given asset will decline following construction or renewal of the asset: it is simply not realistic to expect assets to remain in a “like new” condition indefinitely. On the other hand, if the value of the asset inventory has declined to the point that is demonstrably suboptimal (e.g., a case in which assets are in such poor condition that users experience increased costs from delay and the agency incurs increased costs from emergency maintenance) then merely maintaining such a suboptimal condition is undesirable. Thus, answering this question requires additional analysis to determine the asset value associated with achieving an agency’s “desired state of good repair,” and the cost to achieve this value. Once obtained, the answer supports decisions about how much to invest in the asset inventory.
Market value is estimated based on expert judgement and/or industry defaults.
Market value is established through a one-time analysis of asset resale or other data and updated in subsequent years based on inflation.
Market value is established through a well-documented process that includes: analysis of asset resale or other data; assessment of how assets should be grouped for analysis (e.g., by system, material and/or surface type); and a defined update cycle (e.g., once every 1 to 2 years).
Asset useful life is estimated based on expert judgement and/or industry defaults.
A one-time analysis is performed to establish asset useful life based on analysis of historic data and/or asset models.
Asset useful life assumptions are based on models used in an agency’s management systems. The assumptions are periodically validated and updated through a well-documented process.
Cost to maintain current value, ASR and asset ACR are or can be calculated using annual depreciation and expenditures.
Cost to maintain current value, ASR and asset ACR are or can be calculated using annual depreciation and expenditures. In addition, supplemental analysis is performed using the agency’s management systems to establish the cost to maintain current value.
Cost to maintain current value, ASR, ACR and AFR are calculated and used to support investment decisions. Supplemental analysis is performed using the agency’s management systems to establish the cost to maintain current value and the cost to achieve the desired state of good repair.
Needed funding is reported in the agency’s TAMP. Needed funding is assumed to be equal to the cost to maintain current value.
A separate analysis is performed using the agency’s management systems to support the calculation of the funding needed to achieve and maintain the agency’s desired state of good repair.
A separate analysis is performed using the agency’s management systems to support the calculation of the funding needed to achieve and maintain the agency’s desired state of good repair. Needed funding is considered in establishing asset investment levels.
To the extent that funds are insufficient for addressing all of an agency’s investment needs, it may be necessary to prioritize between different asset classes or networks (e.g., the Interstate System, Non-Interstate NHS, and Non-NHS). Information on asset value helps communicate the size of the inventory expressed in a single unit of measure – dollars. It also illustrates the impacts of different budget allocations. If the measure of value is constructed such that it is proportional to the economic value of the asset inventory, then one can demonstrate that an investment approach which maximizes value across asset classes and networks also maximizes societal benefits. For example, many agencies intentionally invest less in maintaining low volume roads than an Interstate, but the justification for this type of investment strategy becomes less defensible if all lane miles have the same replacement value.
Calculations of economic value rely on estimates of detour distance and speed to estimate changes in user costs from addition or removal of an asset, but do not attempt to quantify the impact of changes in travel demand.
Calculations of economic value rely on estimates of detour distance and speed to calculate changes in user costs from addition or removal of an asset. The elasticity of travel demand is used to estimate changes in traffic volumes.
Calculations of economic value utilize travel demand models to quantify impacts of potential changes to the network from addition or removal of an asset.
The analysis is limited to asset purchase or construction and reconstruction. Asset reconstruction is assumed to have the same cost and effect as initial construction (resulting in a residual value of 0).
A determination is made for each asset class and component concerning whether to calculate residual value based on salvage value or the difference between asset construction and reconstruction. Salvage values are established based on expert judgement.
A determination is made for each asset class and component concerning whether to calculate residual value based on salvage value or the difference between asset construction and reconstruction. Salvage values are established based on analysis of historic data.
Asset value is reported by asset class and system in the agency’s TAMP or supporting documents.
Asset value and supporting measures such as the cost to maintain current condition, ASR, AFR and ACR are reported by asset class and system in the agency’s TAMP or supporting documents.
Asset value and supporting measures such as the cost to maintain current condition, ASR, AFR and ACR are reported by asset class and system in the agency’s TAMP or supporting documents. Information on asset value and related measures is used to support decisions concerning the allocation of funding between asset class and system.
Information on asset value, together with supporting management systems, can be used to test different asset lifecycle strategies and illustrate the effectiveness of different strategies for maximizing value. Doing this requires predicting asset value assuming different strategies and comparing their results. For instance, one can compare a proactive strategy, in which interventions are performed over time to achieve or extend the expected asset life, to a more reactive strategy, in which few or any interventions are performed, shortening asset life. To perform such an analysis, one must adjust asset life assumptions for each scenario and/or base depreciation on changes in condition rather than asset age. Note that while asset value can help support decisions about asset life cycle strategies, a management system is needed to develop potential lifecycle strategies and determine what specific interventions are needed for a given asset.
The NPV of different potential life cycle strategies is explicitly calculated when selecting asset life cycle strategies.
The NPV of different potential life cycle strategies is explicitly calculated when selecting asset life cycle strategies. Asset value is used as a component of life cycle cost, such as for quantifying the residual value at the end of the analysis period.
The NPV of different potential asset life cycle strategies is explicitly calculated when selecting strategies. The calculation includes relative impacts to travelers and society for different life cycle strategies, such as changes in travel time or operating costs.
Much of the discussion thus far has revolved around the value of the asset, as it relates to construction and maintenance costs. However, two assets of the same type, length, and roadway characteristics, may generate strikingly different value for the communities that use them. Variations in the volume of traffic, the availability of alternative routes, and the accessibility offered by these roads are only some of the factors affecting how road users perceive their value. For example, a road user whose next best alternative adds an additional hour to their commute will value the presence (and maintenance) of that road much more highly than the user with several equidistant alternative routes. When considering investment decisions, it is important to account for the road user’s perspective. The ISO asset management standard (1) includes further discussion of this topic.
The overall value from an agency’s assets is calculated to help establish the overall value of the assets to travelers and society.
The overall value from an agency’s assets is calculated. The calculation considers changes value related to asset age or condition.
The overall value from an agency’s assets is calculated. The calculation considers changes value related to asset age or condition. Further, the calculation is used to support decisions about agency investments in relevant applications such as selecting resilience investments.