Life Cycle Cost Analysis Virginia Concrete Conference March

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Life Cycle Cost Analysis Virginia Concrete Conference March 6 -7, 2014 Luis Rodriguez, P.

Life Cycle Cost Analysis Virginia Concrete Conference March 6 -7, 2014 Luis Rodriguez, P. E. Federal Highway Administration 1

Presentation Outline § Life Cycle Cost Analysis Definition § LCCA Five Steps Process §

Presentation Outline § Life Cycle Cost Analysis Definition § LCCA Five Steps Process § Current Issues § Resources / Reference 2

Life-Cycle Cost Analysis Definition § A process for evaluating the total economic worth of

Life-Cycle Cost Analysis Definition § 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 21 st Century 3

Transportation Performance Management LCCA Overview An analytical tool to provide a cost comparison between

Transportation Performance Management LCCA Overview An analytical tool to provide a cost comparison between two or more competing design alternatives producing equivalent benefits for the project being analyzed.

The LCCA Process § Step 1: Establish alternatives § Step 2: Determine timing of

The LCCA Process § Step 1: Establish alternatives § Step 2: Determine timing of required activities § Step 3: Estimate agency and user costs § Step 4: Compute life-cycle costs § Step 5: Analyze the results 5

Step 1: Establish Alternatives § Activities to ensure performance § Initial construction or rehabilitation

Step 1: Establish Alternatives § Activities to ensure performance § Initial construction or rehabilitation activity § Future rehabilitation and preservation activities 6

Serviceability Step 2: Determine Activity Timing Service Life Terminal Serviceability Index Time Initial Activity

Serviceability Step 2: Determine Activity Timing Service Life Terminal Serviceability Index Time Initial Activity One Activity Two Analysis Period Long enough to capture differences between alternatives When will the future preservation and countermeasure costs be incurred? 7

Step 3: Estimate Agency and User Costs § Include cost elements that are different

Step 3: Estimate Agency and User Costs § Include cost elements that are different between alternatives § Exclude cost elements that are the same between alternatives v. Agency overhead costs v. Real estate acquisitions v. Normal operations user costs 8

Step 3: Estimate Agency and User Costs § Approach fundamentals v. Compare demand capacity

Step 3: Estimate Agency and User Costs § Approach fundamentals v. Compare demand capacity under normal operations and work zone conditions v. Determine how traffic is impacted v. Convert traffic impacts into costs 9

Cash Flow Diagram Initial Activity $ Agency Costs Initial Activity Work Zone $ User

Cash Flow Diagram Initial Activity $ Agency Costs Initial Activity Work Zone $ User Costs Rehab 1 Preservation Activities Preservation Work Zones Rehab 1 Work Zone Salvage or Remaining Value Time 10

Step 4: Calculate NPV of Life -cycle Costs N Σ Net Present Value =

Step 4: Calculate NPV of Life -cycle Costs N Σ Net Present Value = (Costk) x of Costs k=0 Costk N d nk = cost of activity = length of analysis period = discount rate = year of expenditure 1 nk (1 + d) Present Value Factor 11

Step 5: Analyze the Results § How do agency costs compare? § How do

Step 5: Analyze the Results § How do agency costs compare? § How do user costs compare? § Can trade-offs be made? 12

Current Issues • MAP 21 and LCCA • GAO Report: LCCA – Pavement Selection

Current Issues • MAP 21 and LCCA • GAO Report: LCCA – Pavement Selection • LCCA and Alternative Bidding

Transportation Performance Management MAP-21 and LCCA

Transportation Performance Management MAP-21 and LCCA

Transportation Performance Management MAP-21 to asset management? Each State is required to develop a

Transportation Performance Management MAP-21 to asset management? Each State is required to develop a risk-based asset management plan for the National Highway System (NHS) to improve or preserve the condition of the assets and the performance of the system. (23 U. S. C. 119(e)(1), MAP-21 § 1106)

Transportation Performance Management Highway Asset Management Plan Contents – pavement and bridge inventory and

Transportation Performance Management Highway Asset Management Plan Contents – pavement and bridge inventory and conditions on the NHS – objectives and measures – performance gap identification – lifecycle cost and risk management analysis – a financial plan – investment strategies

Transportation Performance Management GAO and Next Steps

Transportation Performance Management GAO and Next Steps

Transportation Performance Management GAO and Next Steps § Define Program Characteristics § Obtain Data

Transportation Performance Management GAO and Next Steps § Define Program Characteristics § Obtain Data § Verify what was used was correct § Document the Estimate § Present Estimate for approval § Update the Estimate

Alternate Bidding § What is the FHWA position on alternate bidding for pavement type

Alternate Bidding § What is the FHWA position on alternate bidding for pavement type selection? FHWA considers alternate pavement type bidding a suitable approach for determining pavement type when engineering and economic analysis does not indicate a clear choice between different pavement designs. FHWA Program Performance 19 19

Transportation Performance Management Consideration of Challenges bility Flexi Con siste ncy LCCA

Transportation Performance Management Consideration of Challenges bility Flexi Con siste ncy LCCA

LCCA Resources LCCA Case Study User Manual LCCA Primer LCCA Technical Bulletin http: //www.

LCCA Resources LCCA Case Study User Manual LCCA Primer LCCA Technical Bulletin http: //www. fhwa. dot. gov/infrastructure/asstmgmt/lcca. htm 21

Real. Cost LCCA Software • Microsoft Excel based application – existing user expertise and

Real. Cost LCCA Software • Microsoft Excel based application – existing user expertise and user customizable • User interface – separates inputs from analysis methodology • Offers both Deterministic and Probabilistic Analysis • Available free of charge, regular enhancements and technical assistance from FHWA 22

Reference § FHWA LCCA Internet Site: http: //www. fhwa. dot. gov/infrastructure/asstmgm t/lcca. cfm §

Reference § FHWA LCCA Internet Site: http: //www. fhwa. dot. gov/infrastructure/asstmgm t/lcca. cfm § GAO Report : LCCA-Pavement Selection http: //www. gao. gov/products/GAO-13 -544 § FHWA TA on Use of Alternative Bidding for Pavement Type Selection: http: //www. fhwa. dot. gov/pavement/t 504039. cfm 23

Thank You Luis Rodriguez, P. E. Federal Highway Administration luis. rodriguez@dot. gov 404 -562

Thank You Luis Rodriguez, P. E. Federal Highway Administration luis. rodriguez@dot. gov 404 -562 -3681 http: //www. fhwa. dot. gov/resourcecenter/ 24

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