Where should we invest? or comparing apples with oranges 1 Garry Sterritt Asset Investment Manager, Roads Directorate, Transport for London.

Where should we invest?or

comparing apples with oranges

1

Garry SterrittAsset Investment Manager, Roads Directorate, Transport for London

Apples vs. oranges!!

• It’s like comparing apples to oranges!!– This is a logic fallacy– A particularly deceptive

argument which seems correct

– ...but upon further examination is found to be incorrect

• We compare apples and oranges all the time!!

• How do you value an apple to an orange?– Cost / offers– Taste - personal

preference– Ease of access!– Filling effect, etc.

• These are your Value Criteria– Common criteria

enable an objective and fair comparison

2

...the same holds true for highways

• We all have a diverse asset base

• ...but they all serve a common purpose

3

Asset Quantity

Carriageway 580km network length (2554 lane km)

Footways 2,989,370m2 (over 1000km)

Bridges & Structures Over 1800 structures

Tunnels 13 major road tunnels

Lighting Over 45,000 lit assets

Drainage Over 45,000 gullies & 800km of drains

Green Estate Over 40,000 roadside trees

What are the questions & criteria?

• What are we trying to answer:

– How much should we invest in our highway assets?

– Where do we invest to get the best outcomes?

• What defines our value criteria?

– Goals and objectives: Mayor’s Transport Strategy

– Vision for TfL Roads Directorate: Safe, reliable and cared for streets

4

5

Common Value Criteria and a common currency

Two questions: Common Value Criteria

6

Where to invest?

Value Management

Prioritised programme of

works

Rate & cost schemes &

options

Identify candidate schemes

Analyse condition data

Network intelligence

Asset budgets & strategies

How much to invest?

Asset Investment Planning

Asset inventory & condition data

Asset deterioration models & cost data

Investment scenarios & strategies

Analyse and compare

investment options

Agreed budget, asset splits &

asset strategies

Budget

Common Value Criteria

• Safety Risk• Function Risk

• Financial

Common Currency

• “It’s easy to have common Value Criteria, but they are not directly comparable between assets”

• For example, if condition data informs safety or customer satisfaction, then:– Carriageway – SCANNER, DVI, SCRIM, CVI– Footway – CVI, DVI– Bridges – BCI– Lighting columns – structural testing– Trees – condition survey

• All have different scales, meanings, collection techniques etc.– So the Value Criteria need to be translated to and

expressed on a common currency, e.g. £££

7

How do you translate asset information to a common currency?

• The magic formula is as follows:– Commitment from key/senior staff

– Staff time and resources

– Use real world examples, across all asset types, to support discussions and decisions

– Understand the differences between asset types

– Bring domain experts together

– ...and locking them in a room until they agree!

• It is challenging and we are only part way along our journey

8

9

Asset Investment Planning

Asset Investment Planning:Balancing Safety Risk, Cost & Satisfaction

• Strong correlation between SOGR and Customer Satisfaction

• SOGR has a major impact on WLC (Capital and Revenue)

• SOGR of bridges and structures has a lower impact on customer satisfaction

• A low SOGR results in higher risk exposure

10

State of Good Repair HIGH LOW

HIGH

Cust

omer

Sat

isfac

tion,

Risk

and

Who

le Li

fe C

ost (

WLC

)

Decision Zone

Safety Risk

Whole Life Cost

Customer Satisfaction

CARRIAGEWAY

State of Good Repair HIGH LOW

HIGH

Cu

sto

me

r S

atis

fact

ion

, Ris

k an

d

Wh

ole

Lif

e C

os

t (W

LC

)

Decision Zone

Safety Risk

Whole Life Cost

Customer Satisfaction

BRIDGES

Our approach

• Complex analysis due to number of assets and variables involved, e.g.– Deterioration over a 10 to 20 year period

– Treatment options, costs and effects

– Budget constraints vs. performance targets

• We needed an Investment Planning Model that could cater for all asset types– Generic framework that enables the asset, its state,

deterioration, costs and strategies to be defined

– Enables different asset types to be analysed in the model at the same time, i.e. budget trade-offs

11

What does the customer want?

• We asked road users, in face-to-face surveys:– To identify their preferred intervention level– To identify their minimum acceptable intervention level

12

Investment Planning Model (MS Excel)

13

14

Value Management

Value Management

• Value Management - a systematic approach for identifying, assessing, prioritising and optimising a portfolio of projects, based on an agreed set of Value Criteria, which maximises contribution to the business objectives for a defined budget

• A process for ensuring fair allocation of resources, taking account of value drivers and scheme specific information

15

Value Management Criteria

• Safety – the risk posed to the public

• Functionality – the risk to network performance; including but not restricted to, availability and reliability

• Environment – the risk posed to the environment

• Financial – providing WLC savings considering both direct costs to TfL and indirect costs to the economy

16

Risk Scoring

Financial Scoring

Value Management documentation

• Value Management of the capital programme– Part 1. Overview– Part 2. Carriageways– Part 3. Footways– Part 4. Structures– Part 5. Tunnels– Part 6. Lighting– Part 7. Drainage– Part 8. Safety barriers– Part 9. Green estate

17

Value Management: Risk Scale

18

Risk Zone Description

CRITICAL

80 to 100

Action must be taken as soon as reasonably practicable to ensure safety

HIGH

60 to 80

Action must be taken within the programme year to prevent an escalation in (i) Critical Priority schemes; and (ii) incidents of accidents, delays and congestion

MEDIUM

40 to 60

Action should be taken within the programme period to support delivery of Mayoral objectives, State of Good Repair outcomes, reduce incidents of accidents, delays and congestion, and reduce Whole Life Costs

LOW

< 40

Action may be appropriate on the basis of WLC savings and reducing future disruption

Where to Spend: Optimising• Optimise risk for the defined budget

– Each scheme has several options where risk and cost are evaluated for each

19

Sch

eme

A Option 1

Option 2

Option 3 Sch

eme

B Option 1

Option 2

Option 3 Sch

eme

C Option 1

Option 2

Option 3

Carriageway

Sch

eme

F Option 1

Option 2

Option 3Sch

eme

E Option 1

Option 2

Option 3Sch

eme

D Option 1

Option 2

Option 3

StructuresS

chem

e I Option 1

Option 2

Option 3Sch

eme

H Option 1

Option 2

Option 3Sch

eme

G Option 1

Option 2

Option 3

Lighting

OptimiseForward

Programme

Option 1Scheme B

Optimum Bundle

Option 3Scheme C

Option 2Scheme D

Option 3Scheme E

Option 1Scheme F

Option 2Scheme H

c/w

c/w

str

str

str

lig

20

Structures &

Tunnels

C/W &

F/W

VM cross-asset matrix

Drainage

Lighting

Updated VM Matrix

• Not a theoretical paper exercise

• Developed through workshops using real examples and attended by domain experts

21

1 £3.00 £10.00 £30.00 £100.00 £300.00 £1,000.00 £3,000.00 £10,000.00 £30,000.00 £100,000.00

2 £1.50 £5.00 £15.00 £50.00 £150.00 £500.00 £1,500.00 £5,000.00 £15,000.00 £50,000.00

5 £0.60 £2.00 £6.00 £20.00 £60.00 £200.00 £600.00 £2,000.00 £6,000.00 £20,000.00

10 £0.30 £1.00 £3.00 £10.00 £30.00 £100.00 £300.00 £1,000.00 £3,000.00 £10,000.00

25 £0.12 £0.40 £1.20 £4.00 £12.00 £40.00 £120.00 £400.00 £1,200.00 £4,000.00

50 £0.06 £0.20 £0.60 £2.00 £6.00 £20.00 £60.00 £200.00 £600.00 £2,000.00

100 £0.03 £0.10 £0.30 £1.00 £3.00 £10.00 £30.00 £100.00 £300.00 £1,000.00

250 £0.01 £0.04 £0.12 £0.40 £1.20 £4.00 £12.00 £40.00 £120.00 £400.00

500 £0.01 £0.02 £0.06 £0.20 £0.60 £2.00 £6.00 £20.00 £60.00 £200.00

1000 £0.00 £0.01 £0.03 £0.10 £0.30 £1.00 £3.00 £10.00 £30.00 £100.00

10000 £0.00 £0.00 £0.00 £0.01 £0.03 £0.10 £0.30 £1.00 £3.00 £10.00

100000 £0.00 £0.00 £0.00 £0.00 £0.00 £0.01 £0.03 £0.10 £0.30 £1.00

1000000 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £0.01 £0.03 £0.10

3 10 30 100 300 1,000 3,000 10,000 30,000 100,000

LIK

EL

IHO

OD

(1

in

x y

ears

)

CONSEQUENCES (£'000)

Conclusions

• You can compare apples with oranges

• You can compare different highway assets– ...but it takes some work to develop/embed the process

• You need a common set of Value Criteria, a common currency and commitment

• Don’t expect it to be perfect– It can evolve and be refined over time

• It provides a fair and objective basis for:– Determining investment needs; and– Prioritising investment

22

23

Thank you