Asset Management Asset Management Strategies to Optimize Strategies to Optimize Transportation Investment Transportation Investment By By Prof S Khasnabis Prof S Khasnabis Wayne State University, Detroit, USA. Wayne State University, Detroit, USA. Fulbright Research Scholar 2004 Fulbright Research Scholar 2004 Visiting Faculty, Indian Institute Of Technology Visiting Faculty, Indian Institute Of Technology Bombay, India Bombay, India Presentation At Presentation At Bengal Engineering and Science University, Shibpore Bengal Engineering and Science University, Shibpore 29 29 th th November 2004 November 2004
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Asset Management Strategies to Optimize Transportation Investment Asset Management Strategies to Optimize Transportation Investment By Prof S Khasnabis.
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Asset Management Strategies Asset Management Strategies to Optimize Transportation to Optimize Transportation
InvestmentInvestment
By By Prof S KhasnabisProf S Khasnabis
Wayne State University, Detroit, USA.Wayne State University, Detroit, USA.Fulbright Research Scholar 2004Fulbright Research Scholar 2004
Visiting Faculty, Indian Institute Of Technology Bombay, Visiting Faculty, Indian Institute Of Technology Bombay, IndiaIndia
Presentation AtPresentation AtBengal Engineering and Science University, ShibporeBengal Engineering and Science University, Shibpore
2929thth November 2004 November 2004
United States Educational United States Educational Foundation In India (USEFI)Foundation In India (USEFI)
Educational Information Center Affiliated with the Educational Information Center Affiliated with the Bureau of Educational and Bureau of Educational and Cultural Affairs of the Cultural Affairs of the US US Dept. of State.Dept. of State.Promote Mutual Understanding Between People of Promote Mutual Understanding Between People of
India and USA.India and USA.Educational / Cultural Exchange of Scholars Educational / Cultural Exchange of Scholars Professionals and Students.Professionals and Students.
USEFI …Cont..USEFI …Cont.. Also known as Fulbright Commission.Also known as Fulbright Commission. Enables Research, Lectures and Studies Enables Research, Lectures and Studies Administration of Fullbright fellowship for Indian Administration of Fullbright fellowship for Indian
and American Citizensand American Citizens Promotion of Educational exchange among Promotion of Educational exchange among
Fulbrighters and their CommunitiesFulbrighters and their Communities Educational advising for students interested in Educational advising for students interested in
higher education in US, the most preferred higher education in US, the most preferred destination of Indian students going abroad.destination of Indian students going abroad. (approximately (approximately 7500075000 currently enrolled in US currently enrolled in US
Universities)Universities)
USEFI (Location)USEFI (Location)
Headquarter: New DelhiHeadquarter: New Delhi Regional: Chennai, Kolkata, MumbaiRegional: Chennai, Kolkata, Mumbai Website: Website: www.fulbright_india.comwww.fulbright_india.com Satellite Locations: Satellite Locations:
Ahmedabad, Bangalore, Hyderabad and Ahmedabad, Bangalore, Hyderabad and Manipal.Manipal.
Autonomous body formed by the US Congress.Autonomous body formed by the US Congress. 1950 Bilateral Agreement: Board of Directors1950 Bilateral Agreement: Board of Directors
5 from US nominated by US ambassador5 from US nominated by US ambassador 5 from INDIA nominated by Govt. of India5 from INDIA nominated by Govt. of India
Over 7350 Fulbright Fellowships to Indians and Over 7350 Fulbright Fellowships to Indians and Americans since 1950 (Sponsored by Dept. of State).Americans since 1950 (Sponsored by Dept. of State).
An Additional 8000 Fellowships by other US Govt. An Additional 8000 Fellowships by other US Govt. Agencies.Agencies.
Fulbright ProgramFulbright Program
Established in 1946Established in 1946
Legislation introduced by Senator J W FulbrightLegislation introduced by Senator J W Fulbright
Created a large Cultural and Academic network Created a large Cultural and Academic network world wideworld wide
Operates in 140 countriesOperates in 140 countries
UpgradingUpgradingb) Organized Approach Of Investment Decisionb) Organized Approach Of Investment Decision Sound Engineering TechniquesSound Engineering Techniques Robust Economic PrinciplesRobust Economic Principles Uncertainty and Risk of InvestmentUncertainty and Risk of Investment
Asset ManagementAsset Management
a)a) Private IndustryPrivate Industryb)b) Public SectorPublic Sectorc)c) Public Private PartnershipPublic Private Partnershipd)d) A Broad Emerging FieldA Broad Emerging Fielde)e) Forerunners:Forerunners: AustraliaAustralia FranceFrance
New ZealandNew Zealand UKUK USAUSA
SingaporeSingapore Hong KongHong Kong IndiaIndia
ObjectivesObjectives
Develop an Analytic Framework to test AM Develop an Analytic Framework to test AM StrategiesStrategies
Identify Transportation (Infrastructure) ProgressIdentify Transportation (Infrastructure) Progress Identify data needsIdentify data needs Collect DataCollect Data Conduct Preliminary AnalysisConduct Preliminary Analysis
Past and Current AM Projects Past and Current AM Projects at Wayne State Universityat Wayne State University
Among Agencies to Maximize Remaining Life, Among Agencies to Maximize Remaining Life, Subject to different Constraints Subject to different Constraints
Funded ByFunded By
US Dept. Of TransportationUS Dept. Of Transportation
&&
University Of WisconsinUniversity Of Wisconsin
Model 1Model 1Objective function:Objective function:
Maximize Weighted Fleet LifeMaximize Weighted Fleet Life
ΣX = Demand (for new buses)ΣX = Demand (for new buses)
XXii >> 0 (non-negative) 0 (non-negative)
Model 2Model 2Uses Model 1 results and the current age distribution Uses Model 1 results and the current age distribution
of the fleet in terms of remaining life (RL)of the fleet in terms of remaining life (RL)
RL = amount of life left until MNSLRL = amount of life left until MNSL
Concept:Concept:
As REPL/REHAB/REMANF buses are added to As REPL/REHAB/REMANF buses are added to the fleet the distribution changes, increasing the the fleet the distribution changes, increasing the weighted average remaining (WARL) life of a bus in the weighted average remaining (WARL) life of a bus in the peer grouppeer group
Model 2Model 2
WARLWARL
““Health Index” for peer groupHealth Index” for peer group
Medium sized range:Medium sized range:
0 < WARL < 70 < WARL < 7
Taken as the weighted average of the entire Taken as the weighted average of the entire distribution matrixdistribution matrix
Model 2Model 2Existing Weighted Average Remaining Life Existing Weighted Average Remaining Life
(EWARL), similar to WARL but at the (EWARL), similar to WARL but at the agency levelagency level
Optimization: Based on premise that the Optimization: Based on premise that the EWARL will increase as EWARL will increase as REPL/REHAB/REMANF are added to REPL/REHAB/REMANF are added to agencies fleetsagencies fleets
Model 2Model 2
Addition will result in a New WARL Addition will result in a New WARL (NWARL) for the agency(NWARL) for the agency
Therefore, objective function will be to Therefore, objective function will be to maximize the sum of the NWARL for all maximize the sum of the NWARL for all the the agenciesagencies
Constraints will be from Model 1 results Constraints will be from Model 1 results and additional user constraints and additional user constraints
ApplicationApplication
Peer Group of 93 agencies (1, 2…..93) (similar to Peer Group of 93 agencies (1, 2…..93) (similar to actual data in Michigan)actual data in Michigan)
Total fleet size of 720 medium busesTotal fleet size of 720 medium buses
Has 235 buses with RL of 0 years, at $81,540/bus = Has 235 buses with RL of 0 years, at $81,540/bus = $19.16 M$19.16 M
Budget projections from MDOT.Budget projections from MDOT.
ApplicationApplication
Only have funds for 71 buses, $5.79 MOnly have funds for 71 buses, $5.79 M
Same four programs described earlierSame four programs described earlier
7 year planning horizon7 year planning horizon
Must first allocate funds among four Must first allocate funds among four programs programs for first year.for first year.
Model 1 ResultsModel 1 ResultsFor $5.79 M, the 235 bus demand can be For $5.79 M, the 235 bus demand can be satisfied by:satisfied by:
Now must allocate program funds among remaining Now must allocate program funds among remaining 6 years while accounting for maturation.6 years while accounting for maturation.
Model 1 ResultsModel 1 ResultsFor 7 year projection must adopt policy For 7 year projection must adopt policy directives to address limited additional life:directives to address limited additional life:
A vehicle can only be rehabilitated two consecutive A vehicle can only be rehabilitated two consecutive timestimes
A vehicle can only be remanufactured one timeA vehicle can only be remanufactured one time
Can rehabilitate then remanufactureCan rehabilitate then remanufacture
Evaluation of Proposed StrategyEvaluation of Proposed Strategy
Based on improvement proposed strategy brings to Based on improvement proposed strategy brings to fleet compared to current practicefleet compared to current practice
Measured fleet quality by WARL (Health Index)Measured fleet quality by WARL (Health Index)
Method: Convert WARL into dollar value and compute Method: Convert WARL into dollar value and compute Net Present WorthNet Present Worth
Current Practice ProjectionCurrent Practice Projection
Positive value implies initial deficits are compensated by Positive value implies initial deficits are compensated by higher quality of fleethigher quality of fleet
ObservationsObservations
Able to satisfy bus replacement needs through means Able to satisfy bus replacement needs through means other than new buses (can be used for any size bus)other than new buses (can be used for any size bus)
Able to distribute funds among agenciesAble to distribute funds among agencies
Able stay within budgetAble stay within budget
Able to provide “higher quality” of fleet compared to Able to provide “higher quality” of fleet compared to current practicecurrent practice
Project 2:Safety Improvement for Project 2:Safety Improvement for Urban Arterials in SE MichiganUrban Arterials in SE Michigan
Nationwide over 40,000 fatalities/yr (US)Nationwide over 40,000 fatalities/yr (US) Estimated Loss: $250 billion plus/yrEstimated Loss: $250 billion plus/yr Michigan (11 million population) has its own shareMichigan (11 million population) has its own share Focus Area : Urban intersections in SE Michigan (Over Focus Area : Urban intersections in SE Michigan (Over
50% of states population)50% of states population)
Project 2: Cont…Project 2: Cont… Questions to be investigated:Questions to be investigated:
How should safety investments be made(?)How should safety investments be made(?)
What type of improvements(?)What type of improvements(?)
What analytic technique(?)What analytic technique(?)
Development of GuidelinesDevelopment of Guidelines
Funded by Funded by
Michigan Department of TransportationMichigan Department of Transportation
Map of Detroit Metro AreaMap of Detroit Metro Area
Project 3: Public Private Project 3: Public Private Partnership on A Complex Partnership on A Complex
1.1. A third river crossing between DetroitA third river crossing between Detroit(MI,USA) and Windsor (Ontario, CA)(MI,USA) and Windsor (Ontario, CA)
2.A large number of agencies involved2.A large number of agencies involved 3.Largest Trade Corridor, between USA and 3.Largest Trade Corridor, between USA and CANADA CANADA 4.4. NAFTA ConsequencesNAFTA Consequences 5.Need for 35.Need for 3rdrd Crossing Crossing 6.Capacity Vs Customs Problem6.Capacity Vs Customs Problem
7.High Truck Percentage and High Truck Traffic7.High Truck Percentage and High Truck Traffic 8. Border Security8. Border Security
Project 3: Cont…Project 3: Cont…
Location(?)Location(?) Bridge Vs Tunnel(?)Bridge Vs Tunnel(?) Who will Build Own and Prepare(?)Who will Build Own and Prepare(?) Private Industry: Very Little PrecedencePrivate Industry: Very Little Precedence State Reluctant to Invest ($250m)State Reluctant to Invest ($250m) BOOT Approach is suggestedBOOT Approach is suggested Long Term RevenueLong Term Revenue
Funded ByFunded By Wayne State Univ. Center of Legal StudiesWayne State Univ. Center of Legal Studies
SourceSource : : Financing and Managing Infrastructure Projects by Merna and Nirju,Financing and Managing Infrastructure Projects by Merna and Nirju,
Asia Law and PracticeAsia Law and Practice
Typical Project Cashflow for BOOT ProjectsTypical Project Cashflow for BOOT Projects
SourceSource : : Financing and Managing Infrastructure Projects by Merna Financing and Managing Infrastructure Projects by Merna and Nirju, and Nirju, Asia Law and Practice Asia Law and Practice
Michigan Transportation State Michigan Transportation State AM CouncilAM Council
11 member Council established by the state 11 member Council established by the state LegislatureLegislature
Members: Those who own Roadway InfrastructureMembers: Those who own Roadway Infrastructure Michigan: State DOTMichigan: State DOT
83 Road Commissions83 Road Commissions
535 Cities/ Townships535 Cities/ Townships
A total of 619 separate agenciesA total of 619 separate agencies
62% of agencies own less than 25miles62% of agencies own less than 25miles
225 agencies own less than 10miles225 agencies own less than 10miles
Michigan Transportation AM Michigan Transportation AM CouncilCouncil
Council to make Necessary Recommendations on Council to make Necessary Recommendations on Future Pavement and Bridge Investment DecisionsFuture Pavement and Bridge Investment Decisions
Legality may Need to be Tested in CourtLegality may Need to be Tested in Court
Potential Projects In IndiaPotential Projects In India
Mumbai-Pune Toll ExpresswayMumbai-Pune Toll Expressway Bandra-Worli Sea LinkBandra-Worli Sea Link MUTP/World Bank ProjectsMUTP/World Bank Projects Frame work to encourage Private participationFrame work to encourage Private participation DMRC ProgramDMRC Program
AcknowledgementAcknowledgement
Wayne State University GroupWayne State University GroupProf. R.D.EllisProf. R.D.EllisProf. P.A.BrinkmanProf. P.A.BrinkmanJoe Bartus, M.S StudentJoe Bartus, M.S StudentLori Goe Prez. StudentLori Goe Prez. StudentDr. K.Kar, Post Graduate FellowDr. K.Kar, Post Graduate Fellow
Transportation Systems Engineering (TSE) Transportation Systems Engineering (TSE) Group, Group, Indian Institute of Technology, BombayIndian Institute of Technology, Bombay