Fixing, Upgrading, and Modernizing Infrastructure
An important aspect of the narrative around Washington’s $2 trillion infrastructure push, focuses on maintaining and modernizing what we’ve already got. Which is why the opening session kicking off Infrastructure Week 2019, focused on ways to enable infrastructure to serve us longer, to be easily repaired, and to adapt to new forces and trends.
This should not be especially provocative. In fact, there is widespread agreement among governmental agencies and the private sector that economic and financial analyses such as “life cycle cost analysis” (LCCA) should directly inform decision-making regarding spending priorities. However, a report from Eno and the American Society of Civil Engineers found that LCCA has had little application in practice. Only 59 percent of practitioners surveyed said that they currently employ some form of it.
So why the disconnect? Organizations as diverse as Transportation for America and the U.S. Chamber of Commerce relentlessly call out the poor condition of our existing infrastructure. With the focus of funding shifting toward system preservation, greater use of analysis that looks at both upfront and long-term costs, can ensure the sustainability of future budgets and better management of our vital infrastructure.
What’s more, agencies that do conduct LCCA show clear successes including over $30 million saved by the Pennsylvania Department of Transportation and $300 million saved on a rail project at the Regional Transit District in Denver. A pilot program at the Port Authority of New York and New Jersey to test the use of new analytical tools cost the agency about $67,000 but saved $37 million across four projects. These examples illustrate the point that beyond routine maintenance and pavements, the real benefit with using LCCA is its relationship with broader asset management practices at agencies.
Part of the reason, it seems, is the temptation to place high importance on up-front budgets and pay less attention to costs in the future. This is clearly shortsighted. In order to improve our long-term decision making, we need to begin thinking more strategically about how we maintain and operate our infrastructure and manages our assets in the future.
Use of LCCA has been much more prolific in the private sector, as there typically is a need to defend financial investment needs and decisions with an analytical tool, and owners often have multiple potential uses for available funds. The Federal Transit Grant Program also offers a helpful blueprint as funds are only awarded to sponsors that demonstrate their commitment and ability to maintain and operate projects well into the future.
Implementation of LCCA can be better achieved widely through direct action at the federal, state, and local level. In turn, it encourages the development of more robust analysis programs at relatively low cost to agencies. But to do so, we need better data. Agencies often make decisions based on limited information, and setting data standards about the life cycle of infrastructure components can go a long way to ensuring that the results of such analyses are accurate.
LCCA should be the standard in any capital programming process. Given the ongoing funding challenges at the federal and state levels, it is an ever more urgent initiative today.