6.6 Incorporating Maintenance Costs into a TAMP

Introduction

The majority of asset management costs, for large transportation agencies, are contract costs for preservation, renewal, and construction of assets. However, maintenance investments have a significant impact on asset conditions and should be accounted for in a TAMP. Capturing maintenance costs for inclusion in a TAMP often poses unique challenges, because maintenance work is often delivered by in-house crews or through different contract mechanisms than major capital projects. These costs may also be tracked through different IT systems than capital costs.

When capturing costs for incorporation into a TAMP, it is also important to capture what is purchased, or accomplished, with those investments. Maintenance accomplishments are typically captured in terms of maintenance activities. However, the units of accomplishment for these activities may not easily align with asset management measures. Further the units of accomplishment may vary between work performed by in-house crews and work performed by contract.

In-House Maintenance Costs

Maintenance crews commonly report their efforts and accomplishments on a daily basis through a work reporting system. Most State DOTs currently use some form of maintenance management systems (MMS) to report work performed, along with the resulting accomplishments and costs.

In-house maintenance costs commonly include the cost of labor, equipment, materials, and overhead expenses related to work performed by maintenance field crews. These costs are captured through work order or daily report records, in which costs are associated with one or more actions, commonly called “tasks,” performed by the crew. Each task has an associated task code, which serves as a unique identifier, and a specific unit of measure for reporting accomplishments. For example, the task of “ditch cleaning” may have a unit of accomplishment of “feet,” or the task of “mowing” may have a unit of accomplishment of “acres.”

Contract Costs

Maintenance contract costs, like typical construction contract costs, are captured in terms of contract pay items. These pay items commonly do not align with the maintenance. Moreover, the unit of accomplishment may depend on the type of contract used to procure the work. For example, a contract to clean ditches may have a pay item measured in feet of ditch cleaned, cubic yards of material removed, or hours of work performed.

Maintenance contracts may be funded from an agency's Capital program or Maintenance budget. In many cases maintenance contracts funded through different programs are managed with different systems and have different means of tracking both costs and accomplishments. All of these differences can make tracking maintenance costs more challenging than the costs for other work types.

Aligning Costs from Different Sources

To incorporate maintenance costs into a TAMP, the costs from multiple sources need to be aligned in regard to both their financial components and their units of accomplishment.

The primary source of misalignment between in-house and contract maintenance costs is that in-house costs are captured through individual components of labor, equipment, materials, and overhead, whereas contract costs are captured based on pay items that combine each of these components. The labor costs captured through maintenance management systems (MMS) may or may not include an estimate of overhead costs. To facilitate comparison of in-house labor costs to contract costs an overhead multiplier should be applied. Best practices for ensuring in-house costs are accurate includes interfacing the maintenance management systems with the agency’s financial or enterprise resource planning (ERP) system.

Once the costs are aligned financially, they must be aligned to common units of accomplishment to allow them to be incorporated into asset management analyses. The Maryland DOT State Highway Administration (MDOTSHA) and Texas DOT (TxDOT) offer two examples of how this alignment can be accomplished. These examples are taken from NCHRP Report 1076, Guide for Incorporating Maintenance Costs into a Transportation Asset Management Plan. TxDOT’s approach requires inspectors on maintenance contracts to enter daily accomplishment information into both the Capital Program management system, SiteManager, and the MMS. MDOTSHA has developed a set of Project Cost Activity (PCA) codes to track in-house maintenance expenses. These codes are incorporated into the records of all maintenance contracts to facilitate alignment of costs and accomplishments.

Life Cycle Planning

One benefit of categorizing maintenance activities by their impact on the asset life cycle is that it facilitates incorporation of costs from those activities into Life Cycle Planning (LCP) analysis.

• Preventive Maintenance, Repair, and Unit Replacement costs are all critical inputs to LCP analysis. These costs are sometimes considered under the Preservation work type by State DOTs. Assets are typically eligible for each type of maintenance activity at a specific point in their lifecycles. Once a certain level of deterioration has been reached, a given type of activity ceases to be a cost-effective treatment. To incorporate these maintenance activities into LCP for a given asset class, agencies should consider the following:
• 1. The size of the asset inventory.
  2. The number (or percentage) of assets eligible for the activity type.
  3. The length of time a typical asset is eligible for the activity type.
  4. The available treatments and their unit costs.
  5. How the application of each treatment impacts asset conditions.
  6. The quantity of each treatment to be applied in each year of the analysis.
• Operations, routine maintenance, and Organizational Strengthening costs do not have a direct impact on future conditions, and are generally not included in LCP analysis.

Risk Management

Maintenance crews and contracts are often critical components of risk mitigation strategies. The way these resources are deployed to address risks depends on the type of risk, which can be broadly incorporated into two categories: events and trends.

Risk Events

Maintenance resources represent a transportation agency’s first responders to major and minor disruptive events. Costs for response to risk events can be captured using normal work reporting procedures. Agencies often apply a code to signify if the work being reported is in response to a specific event. In some cases, the agency may be deploying maintenance resources in response to an event that has not yet been identified. In these cases, staff may need to review past records so they can be associated correctly.

Trends and Long-Term Change

Maintenance can be deployed to address long-term trends that impact asset conditions. Other trends may impact an agency’s ability to deploy maintenance. Examples of trends that impact maintenance include the following (Allen, et.al. 2023).

• Changes to regulations, requirements or standards may require a rapid response to replace non-conforming assets, or may impact the cost of future maintenance.
• Changing customer expectations may lead to changes in maintenance performance standards and drive future budget changes.
• Funding fluctuations may provide a boost to or decline in maintenance capabilities. In turn this could lead to changes in asset performance, or vulnerabilities.
• Aging infrastructure can lead to network wide changes in maintenance needs. This can occur cyclically, following large building cycles, such as the interstate construction era from 1960 to 1980.
• Staff turnover due to retirements can create a need for better knowledge management.
• Rapid system expansion can lead to an increased need for future maintenance. Since the need is not immediate, there can be a lag between the need arising and an awareness of that need among executives and legislators who establish maintenance budgets.
• Long-term or gradual environmental changes can impact asset performance by exposing infrastructure to conditions it was not designed to withstand. Maintenance may be required to retrofit or replace poorly performing assets.

Financial Planning

The TAMP Financial Plan should consider all sources of funding used to support maintenance. The Financial Plans should indicate how that available funding is expected to be used over the TAMP time period. This will typically require extrapolation or forecasting beyond established maintenance budgets. The maintenance activity categories can be helpful in determining how to account for this funding within the plan.

• Preventive Maintenance, Repairs, and Unit Replacements are often funded and delivered by multiple programs. As such some of these costs may be captured under the Preservation work type, and some captured under Maintenance. Agencies should take care in understanding how this work is funded and delivered to ensure costs are fully captured and not double counted in the TAMP.
• Funding for Operations and Routine Maintenance may come from its own budget line or be part of overall maintenance funding. Additionally, some operations expenses may be funded out of capital programming through programs such as the Congestion Mitigation and Air Quality (CMAQ) program. These activities are generally performed in a similar fashion regardless of asset condition. Therefore, these are commonly included as fixed-cost items that reduce the amount of funding available for activities that improve asset condition. Typically, this is included as an average annual cost.
• Organizational Strengthening activities can be budgeted separately from the other categories to clearly communicate their importance and show what activities are planned. These activities can be tracked using the time, labor, and material features in a maintenance management system.

A process for developing TAMP financial plans has been established through several documents. Most recently, NCHRP Report 1076, Guide for Incorporating Maintenance Costs into a TAMP updated this process to better incorporate maintenance costs (Allen et. al. 2023).

1. Determine the scope of the TAM program.
2. Identify maintenance fund sources.
3. Establish maintenance fund uses.
4. Structure maintenance sources and uses list.
5. Validated the list.
6. Document Constraints.
7. Document assumptions about fixed costs.

Investment Strategies

As described in Chapter 5 of this guide, investment strategies establish a long-term plan for how the agency will apply its resources to achieve its asset management objectives. Agencies typically develop investment strategies through a scenario-based planning process. In this process the agency evaluates costs and benefits of different investment scenarios to choose the most appropriate. Since the majority of TAM funding comes through capital programming that has traditionally been the focus of investment strategy development, incorporating maintenance costs and benefits into this process may require incorporation of additional performance measures, such as those established through Maintenance Quality Assurance (MQA). MQA performance measures are often more directly related to investments in maintenance activities, whether through in-house crews or contracts. NCHRP Report 1076, Guide for Incorporating Maintenance Costs into a TAMP suggests the following steps for developing investment strategies that fully incorporate maintenance investments and benefits (Allen et. al. 2023).

1. Define the role of maintenance in each scenario.
2. Identify existing commitments to future investments in maintenance.
3. Incorporate MMS and MQA data to improve predictions of future conditions.
4. Perform initial budget allocations, including maintenance.
5. Identify candidate projects and field crew capacity.
6. Develop scenarios for analysis.
7. Review predicted future conditions and predicted maintenance needs.
8. Finalize funding levels by use.
9. Document maintenance strategies for addressing performance gaps.
10. Document assumptions and strategies.