PRIORITIZATION Instructional Objectives Describe the objectives of a multi-year prioritization analysis Understand the differences between other multi-year analysis techniques Describe the components of a multi-year prioritization analysis Understand the use of a multi-year prioritization analysis as part of an agency’s project selection process PMS Economics CONCEPTS AND THEORIES Analyses Sophistication Increasing Level of Sophistication Optimization Prioritization Ranking ANALYSES ECONOMIC ANALYSES - - RANKING - SINGLE YEAR COST SUMMARY MULTI-YEAR PRIORITIZATIONS OPTIMIZATION LIFE CYCLE COST ANALYSIS P&E, CONST, ANNUAL MAINT, REHAB, SALVAGE NET PRESENT WORTH OR EQUIVALENT UNIFORM ANNUAL COSTS DISCOUNT RATE = INTEREST - INFLATION RATE ECONOMIC ANALYSES Ranking - SINGLE YEAR COST SUMMARY pavements are ranked in accordance with the ranking guidelines until the amount of money available for maintenance and rehabilitation projects is used up. •Easiest to Understand •Based on a single year’s needs •Determines a single year’s budget •Repeated each year Ranked by: •Condition •Initial Cost •Cost and Timing •Life Cycle Cost •Benefit/Cost Ratio Ranking Current Condition Identify Pavement Needs Select Treatment and Estimated Cost from Rules Match Ranked List to Budget Apply Rank by Criteria and Sort Ranking Example Section 67A Condition $ Cost Level Treatment (millions) 67 Minor 1 67B 82 PM 0.5 67C 52 Major 3 14A 71 Minor 2 14B 74 Minor 1.5 17 85 PM 0.5 Results for $7 Million Budget Section ID Sort by Ranking 67C Sort Treatment 1 Condition Level 52 Major Cost ($millions) 3 67A 2 67 Minor 1 14A 3 71 Minor 2 14B 4 74 Minor 1.5 67B 5 82 Prev. Maint. 0.5 Univ1 6 85 Prev. Maint. 0.5 Limitations To Ranking Long-term impacts on network are not considered Rate of deterioration is not considered Economic analysis for alternative strategies not considered ECONOMIC ANALYSES Multi-Year Prioritization (MYP) A method of allocating limited resources in an efficient and cost-effective way over a multiyear period (2-10 year’s needs), through an evaluation of long-term impacts. A PMS process or tool used to objectively identify the best combination of treatments and projects over a multi-year program. MYP Analysis Requirements Condition/ inventory information Performance models Treatment types, triggers, resets, costs, strategies/ conditions Analysis tools ECONOMIC ANALYSES Multi-Year Prioritization (MYP) Prioritization techniques use mathematical modeling tools to achieve the best combination of projects over the specified analysis period: •Pavement performance Models predict future condition and suggest timing of needed rehab •Projects are identified with need for Pavement Preservation, Minor Rehab, Major Rehab or Reconstruction •The most effective timing for the applying the appropriate treatment are identified •The predicted impact on the network over time for each combination of projects over a given analysis period. Multi-Year Prioritization (MYP) Current or Predicted Condition Select Treatment and Timing for Each Segment Estimate Costs Match Prioritized List to Budget Conduct Analysis Benefit/Effectiveness Calculation Pavement Condition Index Existing Pavement Performance Apply Treatment Benefit Predicted Pavement Performance Trigger Limit Age or Traffic Loads ECONOMIC ANALYSES Benefits Provided By MYP Forecast future conditions Analyze treatment timing options Evaluate effectiveness of alternative strategy Perform economic analyses Use of objective measures for prioritizing needs Project future budgets Predict the impact of each combination of treatments and projects on the network over the given analysis period Projects that provide the greatest benefit to the agency will have a higher priority in the program development process. Effect of Treatment Timing on Costs Typical Variation of Pavement Condition as a Function of Time You never have enough fish! ECONOMIC ANALYSES Decision Benefits Provided By MYP Provide answers for the questions: 1. What Average Network condition will be reached for a given level of funding? 2. What budget is needed to reach or maintained a given level of condition? Example Network Performance Illustrates Policy Decisions What are the average projected condition for the given Budget Levels? Budget Scenarios Condition Economic Analysis 100 90 80 70 60 50 40 30 20 10 0 Do Nothing $0 $100,000 $300,000 0 1 2 3 4 5 Age 6 7 8 9 10 Example Network Performance Illustrates Policy Decisions What will it cost to maintain the current Condition Level? Cost Cost to Maintain $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2000 Budget Scenarios 2001 2002 2003 2004 2005 Year 2006 2007 2008 2009 2010 Pavement Preservation Strategies and Treatments Decision trees, featuring a series of branches that are selected based on overall condition, types of distress present, functional classifications, or other factors. Each branch eventually leads to the preferred treatment or family for a given set of conditions. Matrices, featuring tables that describe certain characteristics and the allowable ranges for particular levels of rehabilitation. The matrix may identify the preferred treatment or list a series of feasible alternatives that are considered further in terms of their effectiveness. Rules, including a set of rules (equations) that specify particular treatments for certain conditions. Considerations in Developing Decision Trees/ Matrices Decision factors Availability of data Ability to predict conditions Flexibility Considerations in Developing Decision Trees/ Matrices Decision trees lead to one or two possible treatments, although other treatments may be viable alternatives. Consideration is not given to the effectiveness of one treatment over another or the benefit of one treatment over another. Treatment Selection Decision Trees Treatment Family Pavement Condition Index >4 Asphalt Pavement Condition = 4 or below Present Preventive Maintenance Structural Overlay Load-Associated Structural Deterioration Not Present Functional Overlay Treatment Selection Treatment Selection Decision Matrix Surface Type Asphalt Concrete Asphalt Concrete Asphalt Concrete Condition Level Structural Deterioration 70-100 N/A 0-69 Not Present 0-69 Present Treatment Type Preventive Maintenance Functional Overlay Structural Overlay Programmed Rules Outline criteria for selection of preferred treatment Set treatment for condition range Could be transferred into decision matrices or decision trees Programmed Rules (Pavement_Type = 'BC' or = 'CO') and ( (PCI >= 50 And PCI <= 70 And OCI >= 60) or (Skid_Value <= Skid_Trigger) or (Avg_Rut>= 0.5 And Avg_Rut <= 1.0)) and OCI >= 55 Treatment Selection based on complex rules Requirements for Developing a Treatment Strategy A pavement strategy is a plan of action comprised of the application of one or more maintenance or rehabilitation treatments designed to improve or maintain the condition of a pavement segment above some predetermined minimum requirement. Requirements for Developing a Strategy List of strategy guidelines and treatment options Treatment Costs Pavement performance models for treatment Options in Strategy Development Single Treatment Strategy Most common approach Several feasible alternatives may be identified for each section Each treatment considered independently Most cost-effective treatment generally selected Multiple Treatment Strategy Combination of treatments considered for each section Effectiveness of all treatments is representative of effectiveness of entire strategy Subsequent treatments affect selection of strategy Repeated treatments Specific Treatments •Preventive Maintenance •Rehabilitation/Resurfacing •Reconstruction }Simple grouping Detailed Choices Asphalt Routine Maintenance Surface Seal Coats Milling and Inlays Thin Overlay Thick Overlay Mill and Overlay Reconstruction Concrete Slab Grinding Full- and Partial-Depth Repairs Crack and Seat Thin-Bonded Overlay Unbonded Overlay Slab Replacement Reconstruction Pavement Condition Index Treatment Options in MYP Performance Prediction Model Benefit or Effectiveness Treatment Reset (Area under the curve) Predicted Performance Condition Increase Trigger Limit Life Extension Marginal Cost Effectiveness Incremental Benefit/Cost Ratio Age or Traffic Loads Performance Models Current Time 100 Condition Index 80 Treatment Condition reset Benefit=area x traffic level Trigger Zero Treatment Associated Cost adjusted for inflation Condition reset PM Time or Age Life Extension Performance Models Current Time 100 Condition Index 80 Treatment Condition reset Trigger Benefit=area x traffic level For PM treatment that do not improve condition just extend life Zero Treatment Associated Cost adjusted for inflation Condition reset PM Time or Age Life Extension Pavement Condition Index Treatment Options in MYP Existing Performance Treatment Strategy 1 in Years X and Z at $ Cost Subsequent Treatment Trigger Point for Treatment 1 Treatment Strategy 2 in Year Y at $S Cost Trigger Point for Treatment 2 Age or Traffic Loads Prioritization Analysis Techniques Marginal cost-effectiveness analysis Incremental benefit/cost analysis Ratio calculation – positive ratio= viable strategy – negative ratio= costly strategy Benefits or Effectiveness Effectiveness – Non-Monetary – Area under the curve for some traffic value Benefits – Monetary or Non-Monetary – Area under the curve for some traffic value Costs Agency cost User cost Salvage value Maintenance cost Other relevant costs over the life of the pavement Marginal Cost-Effectiveness (MCE) Identify feasible treatments for each analysis period based on projected condition and established trigger levels Calculate effectiveness (E) of each combination of strategies (area traffic) Calculate cost (C) of each combination in net present value terms Marginal Cost-Effectiveness (cont.) Calculate cost-effectiveness (CE) of each combination as ratio of E/C, where highest value is best Select treatment and timing for each section with best CE Calculate marginal cost-effectiveness (MCE) of all other strategies as follows: MCE = (Er-Es)/(Cr-Cs) Marginal Cost-Effectiveness Calculations The following steps are completed in the marginal cost-effectiveness analysis: 1. Identify the feasible treatments for each analysis period based on the projected condition and established trigger levels; 2. Calculate the effectiveness (E) of each combination of strategies (effectiveness is generally the area under the performance curve multiplied by some function of traffic); 3. Calculate the cost (C) of each combination in net present value terms. 4. Calculate the cost-effectiveness (CE) of each combination as the ratio of E/C, where the highest value is the best. 5. Select the treatment alternative and time for each section with the best CE. Marginal Cost-Effectiveness Calculations 6. Calculate the marginal cost-effectiveness (MCE) of all other strategies for all sections as follows: MCE = (Er - Es)/(Cr - Cs) where: Es = effectiveness of the strategy selected in step 5 Er = effectiveness of the strategy for comparison Cs = cost of the strategy selected in step 5 Cr = cost of the strategy for comparison If the MCE is negative, or if Er is less than Es, the comparative strategy is eliminated from further consideration; if not, it replaces the strategy selected in 5. This process is repeated until no further selections can be made in any year of the analysis period. Incremental Benefit/Cost (IBC) The seven dots on the following graph each represent the costs and benefits associated with seven strategies; a donothing and six repair strategies labeled 1 through 6. Each line segment was drawn by starting at the do-nothing point and drawing the segments in such a way that no strategy points exist above the line, and no line segment has a bigger slope than the previous line segment. This segmented line is called the ‘efficiency frontier’ Incremental Benefit/Cost (IBC) Efficiency Frontier Strategy 6 EFFICIENCY FRONTIER BENEFIT S Strategy 4 Strategy 3 Strategy 2 Strategy 1 Strategy 5 IBC DoNothing COST from Deight on Associates Ltd. Incremental Benefit/Cost (IBC) Equivalent Uniform Annual Benefit (EUAB) EUAB = PVB [r (1+r)n] [(1+r)n - 1] Equivalent Uniform Annual Cost (EUAC) EUAC = PVC [r (1+r)n ] [(1+r)n - 1] where: PVC = Present Value Cost PVB = Present Value Benefit r = Discount Rate n = Number of Years Incremental Benefit/Cost (IBC) Calculate Incremental Benefit/Cost IBC j = (EUABj - EUABj-1) (EUACj - EUACj-1) •Treatment for each section are sorted by increasing EUAC •Negative IBC’s are eliminated •Strategies which fall on the efficiency frontier provide the most benefit per unit cost for the agency •Selects the best strategy for each road section to maximize benefits without exceeding budget levels Incremental Benefit/Cost (IBC)