Where should we invest? or comparing apples with oranges Garry Sterritt Asset 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

...the same holds true for highways We all have a diverse asset base ...but they all serve a common purpose 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

Common Value Criteria and a common currency

Two questions: Common Value Criteria 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 Where to invest? Value Management Prioritised programme of works Rate & cost schemes & options Identify candidate schemes Analyse condition data Network intelligence Asset budgets & strategies Budget Common Value Criteria Safety Risk Function Risk Financial Not looking at specific assets, thinking generically Asset Investment – long-term, 10 to 20 years – coarse analysis Value Management – 3 to 5 year detailed programme of works – refined analysis The criteria we use for setting the budget must align with the criteria we use for deciding which schemes we invest in, otherwise there will be a mis-match between Investment Planning and Value Management

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. £££

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

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 Cost, Customer satisfaction and risk  SOGR SOGR – condition and/or performance measures Different for each asset type

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

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 Gives the acceptable range Some assets will not have a customer satisfaction score, e.g. Bridges, they will be more engineering driven

Investment Planning Model (MS Excel) Model contains carriageways and footways Building in bridges, lighting and drainage Further work needs to be done on the direct comparability of the Value Criteria and common currency

Value Management More advanced that Asset Investment Planning work By necessity, because we need to have a forward programme of works

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

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 Risk Scoring Financial Scoring An extra value Criteria has been introduced – Environment Not considered necessary in investment modelling; difficult to model Can be more readily assessed at scheme level

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 Use to produce 2011/12 to 2013/14 programme

Value Management: Risk Scale 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 Trade off – risk vs. cost

Where to Spend: Optimising Optimise risk for the defined budget Each scheme has several options where risk and cost are evaluated for each Forward Programme Option 1 Scheme B Optimum Bundle Option 3 Scheme C Option 2 Scheme D Scheme E Scheme F Scheme H c/w str lig Scheme A Option 1 Option 2 Option 3 Scheme B Scheme C Carriageway Optimise Scheme F Option 1 Option 2 Option 3 Scheme E Scheme D Structures Scheme I Option 1 Option 2 Option 3 Scheme H Scheme G Lighting

VM cross-asset matrix Drainage C/W & F/W Structures & Lighting Tunnels LIKELIHOOD 1-2 10 20 30 40 50 60 70 80 90 100 2-4 9 18 27 36 45 54 63 72 81 4-8 8 16 24 32 48 56 64 8-15 7 14 21 28 35 42 49 15-30 6 12 30-50 5 15 25 50-75 4 75-100 3 100-150 2 150+ 1 £0-0.1m £0.1-0.25m £0.25-0.5m £0.5-1m £1-2m £2-5m £5-10m £10-25m £25-50m £50+m CONSEQUENCES Drainage C/W & F/W Structures & Tunnels Lighting

Updated VM Matrix Not a theoretical paper exercise Developed through workshops using real examples and attended by domain experts

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

Thank you