Life-Cycle Costing for Innovative Pavement Preservation Treatments How to Know if the Investment is Worth It David Hein, P.Eng. Principal Engineer Vice-President, Transportation Pavement Preservation and Maintenance

Why Pavement Preservation? Critical component of system preservation Preserves the public’s Investment Extends pavement service life Saves $$$$ Pavement preservation is aimed at preserving the investment in our highway system, extending pavement life, and meeting user needs. It can be better described as applying carefully selected surface treatments to maintain or extend the service life of the pavement Pavement preservation does not include new or reconstructed pavements or any activity that significantly increases the structurally capacity of the pavement. Pavement Preservation and Maintenance

Traditional Approach Allows deterioration to fair to poor conditions Ride quality and structural Rehabilitation strategy repairs damage Clearly reactive, time consuming and costly The traditional approach allows pavements to deteriorate to a point where it becomes fair to poor conditions. We measure these conditions typically using ride criteria and noting structural distress. At this point any rehabilitation strategy is time consuming and costly. Pavement Preservation and Maintenance

Proactive Approach Applies low-cost preventive treatments 5 to 7 year life Timing is critical Good Condition NO structural damage A true preservation approach involves the application of a series of successful low cost preventive maintenance treatments that individually will last for several years. The key is to apply the right treatment at the right time. This means applying it to the candidate pavement when it is still in good condition and there is no structural damage. One structural damage has occurred then preventive maintenance treatments are of little value. Applying PM treatments to unsuitable pavements has been its biggest barrier to gaining widespread acceptance for the PM concept. Pavement Preservation and Maintenance

How to Select the Appropriate Treatment and Timing? Evaluate the cost-benefit of including preventive maintenance treatments in the life-cycle of pavements in Ohio. This slide is just to show that there is a process in place. Pavement Preservation and Maintenance

Better Informed Decisions What is the condition of the existing pavement What is the expected performance of the pavement How will different treatments affect this performance Right treatment for the Right pavement at the Right time Pavement Preservation and Maintenance

Life-Cycle Cost Analysis Method Analysis Period Performance Period Remaining Life Condition Cost Remaining Value Time Pavement Preservation and Maintenance

LCCA Framework Input variables and factors Analysis period Treatment performance Which costs to include (user costs?) Discount rate Residual or salvage value Analysis methods Economic analysis or formula Computational approach (deterministic vs. probabilistic) Pavement Preservation and Maintenance

Analysis Period Time period used for comparing the costs of alternative design strategies In general, analysis period Should be long enough to reflect long-term cost differences of alternative designs Should be long enough to incorporate at least one rehabilitation Pavement Preservation and Maintenance

Conventional Performance With additional data in 2006 and 2007, these costs will be reevaluated. Pavement Preservation and Maintenance

Performance – 1 PM Treatment With additional data in 2006 and 2007, these costs will be reevaluated. Pavement Preservation and Maintenance

Establishing Service Life For each design alternative, establish initial service life and subsequent M&R activities covering analysis period Based on historical performance (survival analysis) Engineering judgment for project-specific factors: Environment/subgrade Traffic loadings Use of new materials/technologies Pavement Preservation and Maintenance

Treatment Performance Looking at the impact of a pavement preservation program only, this slide illustrates the impact of the pavement preservation program on the life-cycle of the pavement. Pavement Preservation and Maintenance

Goal of Prediction Modeling Pavement Preservation and Maintenance

Pavement Condition Needs Pavement surface condition prior to PM treatment Condition ratings immediately before treatment and since treatment Other information that may affect PM treatment performance: Pavement type Age Traffic Subgrade Pavement Preservation and Maintenance

Thin Overlay Flexible The sections with PCR substantially below 70 in the year prior to the treatment were not used in the performance modeling Pavement Preservation and Maintenance

Microsurfacing – Urban/Flex Pavement Preservation and Maintenance

Ultra Thin Bonded Wearing Course– Composite Long-term PCR for many sections not available because most were constructed since Ohio stated its PM program in 2001. Pavement Preservation and Maintenance

Chip Seal Flexible Pavement Because of the small number of sections in Tier 1, Tier 1 and Tier 2 projects were combined to develop the performance models. These models are preliminary and will be refined with additional data obtained over the next two years (may be even a change in functional form of the model). Pavement Preservation and Maintenance

Thin Overlay Repairs/Flex The high variability in data is a result of several factors including: materials, climate, traffic, support conditions, distress types of existing pavement, thickness of overlay, etc. Pavement Preservation and Maintenance

Microsurfacing - Composite In some cases very little PCR data was available to develop the models. With additional long-term data, these models can be developed over the next two years. Pavement Preservation and Maintenance

Conventional Overlay Pavement Preservation and Maintenance

Control - New Flexible The high variability in data is a result of several factors including: materials, climate, traffic, support conditions, pavement structure, etc. Pavement Preservation and Maintenance

The high variability in data is a result of several factors including: materials, climate, traffic, support conditions, pavement structure, etc. Pavement Preservation and Maintenance

The high variability in data is a result of several factors including: materials, climate, traffic, support conditions, pavement structure, etc. Pavement Preservation and Maintenance

Agency Costs Initial costs All upkeep costs Residual or salvage value (negative cost) When comparing alternatives, only cost items that differ need to be included Examples of similar costs: Shoulder construction Routine maintenance Subgrade preparation Engineering and administrative costs Pavement Preservation and Maintenance

User Costs (Not currently considered in Indiana) Vehicle operating costs (VOC) Depreciation Fuel, oil Maintenance and repair Roadway-related vehicle depreciation Time delay Safety costs (property, injury, life) Environmental cost (emissions, noise) Discomfort costs Pavement Preservation and Maintenance

Components of User Costs User costs include Delays Vehicle operating costs (VOC) Crash costs Pavement Preservation and Maintenance

User Cost Influences User costs are directly related to: Current and future traffic demand Facility capacity Timing, duration, and frequency of work zone restrictions Detour route Pavement Preservation and Maintenance

Work Zone Capacity When work zone capacity exceeds demand User costs are manageable More an inconvenience than cost When demand exceeds work zone capacity Conditions become forced flow Queuing costs can account for 95 percent of user costs Pavement Preservation and Maintenance

User Delay Costs Crash costs between competing alternatives should not vary considerably Vehicle operating costs will vary depending on vehicle type Delay costs (ie, value of time) are extremely controversial Pavement Preservation and Maintenance

$ Value Per Vehicle Hour Value of Time FHWA recommended value of time 21 to 24 22.31 Combination Trucks 17 to 20 18.54 Single-Unit Trucks 10 to 13 11.58 Passenger Vehicles Range Value $ Value Per Vehicle Hour Vehicle Class Pavement Preservation and Maintenance

Discount Rate Discount rate is a function of interest rate and inflation rate The use of current dollars and real discount rate eliminates the effect of inflation Pavement Preservation and Maintenance

How to Get Discount Rate? Analysis of long-term trends in interest rates and associated inflation rates Office of Economic Policy, is in the position to recommend “social discount rate” FHWA recommendation is 3% to 5% Pavement Preservation and Maintenance

Salvage value 1. Residual value Net value from recycling of the pavement Remaining life Remaining life of the pavement at the end of the analysis period Pavement Preservation and Maintenance

Remaining Life A B Serviceable life = x % of Treatment cost x % of L Analysis period Pavement Preservation and Maintenance

Analysis Methods Economic Analysis (Life-Cycle Cost) Formula Analysis (Benefit/Cost Ratio) Benefit = Area under Performance Curve (PCR vs. Age) Cost = NPV NPV = Net Present Value, $/m2 n = Time of future cost, years i = Discount rate Pavement Preservation and Maintenance

Example Deterministic LCCA Without Preventive Maintenance With Preventive Maintenance Using crack sealing as an example, this simplified life-cycle cost analysis shows the positive benefit of adopting crack sealing for pavement preservation. Savings = $ 2,910/km ~ 10 percent Pavement Preservation and Maintenance

Example Deterministic LCCA Using crack sealing as an example, this simplified life-cycle cost analysis shows the positive benefit of adopting crack sealing for pavement preservation. Pavement Preservation and Maintenance

Cost Streams and Savings Using crack sealing as an example, this simplified life-cycle cost analysis shows the positive benefit of adopting crack sealing for pavement preservation. NPW Conventional = $140,523 NPW Preventive Maintenance = $ 131,297 Net Savings per two lane-km = $ 9,226 - (~7 percent) Pavement Preservation and Maintenance

Larger Scale Evaluation Analysis of the cost of performing various treatments (typical costs and variability) Cost-effectiveness/cost-benefit of individual PM treatments Evaluation of applicability of PM treatments, for roadway classes, age and surface condition Pavement Preservation and Maintenance

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Alternative Comparison – Chip Seal, Microsurfacing and NovaChip Pavement Preservation and Maintenance

Alternative Comparison – Various Thin Overlays Pavement Preservation and Maintenance

Probabilistic Methodology Pre-defined statistical distributions for selected input parameters, based on historical data or assumptions Hundreds of simulated total LCCs, based on randomly selected values of input parameters Resulting frequency/cumulative distributions of life-cycle costs for alternative design strategies Interpretation of results based on probabilities Pavement Preservation and Maintenance

Probabilistic Approach Identify the structure and logic of the problem Quantify the uncertainty using probability Perform simulation Analyze and interpret results Make a decision based on assessment of risk Pavement Preservation and Maintenance

Structure and Logic Identify design alternatives Develop life cycle maintenance plan Confirm cash flow Define variability (both certain and uncertain) Costs Treatment life Discount rates, etc. Pavement Preservation and Maintenance

Inputs Output Future M&R Life spans Pavement life span Initial Cost Costs Pavement life span 1. Values randomly selected from each input sampling distribution 2. Life-cycle cost computation is performed 3. Process repeated many times Projected Life-Cycle Costs Output Inputs Discount Rate Pavement Preservation and Maintenance

Probabilistic Approach Deterministic LCCA treats all input values as discrete However, most inputs have an element of uncertainty Deterministic methods treat all inputs as means or best guesses Pavement Preservation and Maintenance

Probabilistic Approach Probabilistic methods allow for the introduction of risk What can happen? How likely is it to happen? What are the consequences? Pavement Preservation and Maintenance

How do we account for uncertainty? Identify the input variability ie, mean and standard deviation Calculate what if scenarios Monte Carlo simulation Decisions can be made based on the probability of occurrence Pavement Preservation and Maintenance

Uncertainty and Probability Need to develop probability distributions Numerous distributions to evaluate probability Can be developed based on statistical analysis and goodness of fit of existing data Can be developed based on expert opinion Pavement Preservation and Maintenance

Probability Distribution Types Pavement Preservation and Maintenance

Probability Distribution Most commonly used in transportation life-cycle costing applications Normal Triangular mean std dev Probability most likely Pavement Preservation and Maintenance

Incorporating the Distribution Can use existing spreadsheets Addition of commercially available software, ie @RISK Crystal Ball FHWA RealCost Software programs add probability distribution functions and simulation techniques Pavement Preservation and Maintenance

Simulation Rigorous sensitivity analysis based on probability distribution variables Iterates separate solutions based on random number sampling Each iteration represents a possible solution Iterative results are compiled and statistically analyzed Pavement Preservation and Maintenance

Simulation Example 27.1 percent probability that conventional alternative will have lower cost than $131,297 – (value from deterministic) Pavement Preservation and Maintenance

Simulation Example 49.5 percent probability that preventive alternative will have lower cost than $131,297 – (value from deterministic) Pavement Preservation and Maintenance

Alternative Comparison Preventative maintenance alternative always less expensive than conventional for modeling conditions Pavement Preservation and Maintenance

Alternative Comparison Preventive Conventional Probability that preventive maintenance alternative always less expensive than conventional for modeling conditions Pavement Preservation and Maintenance

Interpretation of Results Unlike deterministic method, lowest cost is not the only factor Need to look at the likelihood of a particular outcome occurring Histograms and cumulative risk profiles are convenient tools Pavement Preservation and Maintenance

Probabilistic Including User Costs Pavement Preservation and Maintenance

An easy-to-use computer program was developed for the Alliance following the FHWA guidelines. It has the ability to perform LCCA in either a probabilistic or deterministic mode for up to four alternatives. For the probabilistic analysis, information is required on the average and distribution of the discount rate, traffic growth and construction duration. When it is not possible to estimate these distributions, the deterministic mode may be used. The deterministic analysis is based upon the average value expected for the input data. The four categories of information required to perform the LCCA include (mouse click for each) 1) general project information, 2) traffic data, 3) a description of each design alternative, and 4) the rehabilitation and maintenance data for each alternative. After the analysis is performed, a complete report may be generated in Microsoft Excel and the results may be viewed immediately in a graphical output. Pavement Preservation and Maintenance

One of the most important features of this program is its ability to give instantaneous feedback on user delay costs. Within the Work Zone Information, the program allows the user to specify the time of day for lane closures. Thus, night time operations can be evaluated against 24-hour closure scenarios. In this example, a 12-hour night time work zone with a 24-day work period results in a user delay cost of about $80,000, while for the same input… (Go to next slide) Pavement Preservation and Maintenance

Additional References Pavement Preservation and Maintenance

Overall Goals and Benefits Higher user satisfaction Better informed decisions Improved treatment performance Increased safety Cost saving Improved pavement condition Describe the overall goals and benefits of a pavement preservation program. Pavement Preservation and Maintenance

Questions? Pavement Preservation and Maintenance