Webinar 4 — May 8, 2013

1. Transportation Asset Management Webinar SeriesWebinar 4: Asset Management and Risk ManagementSponsored by FHWA and AASHTOPress F5 to enter full screen mode, press Esc to exit full screen mode.Please do not put your phone on hold.Please mute your phone. Webinar 4 — May 8, 2013

2. FHWA-AASHTO Asset Management Webinar Series • Sharing of knowledge is a critical component of advancing asset management practice • This is the fourth of a 12-part webinar series that will be held over the next two years • Webinars will be held every two months with topics such as AM and safety, AM business models, GIS application in AM, etc. • Welcome ideas for future webinar topics and presentations • Submit questions using the webinar’s Q&A feature • Next webinar: Asset Management and Performance-based Planning – July 10, 2013 2:00 EST

3. AM and Risk Management Overview • What is risk management in the context of AM? • Broad definition of risk management: encompassing an agency-wide framework that complements AM and addresses both opportunities and threats • What progress has been made in recent years in the AM and risk management relationship? • Recent five-part series addressing risk-based TAM, produced by FHWA • Risk management is a key component of the AASHTO TAM Guide • Since the guide, an increasing focus on program and enterprise risk management (but don’t lose sight of project risk management) • How is this topic important in the context of MAP-21? • Required risk-based TAMPs have brought new attention to this area

4. Webinar Overview • We’ll hear three distinct takes on asset management and risk management • Presenters will focus on applying risk-based asset management as part of a DOT’s overall approach to transportation asset management • Presentations will cover basic principles of risk-based asset management and illustrate different models • Cases will highlight successful approaches for developing and applying a risk-based asset management strategy

5. Webinar Overview • We’ll hear three distinct takes on asset management and risk management • Presenters will focus on applying risk-based asset management as part of a DOT’s overall approach to transportation asset management • Presentations will cover basic principles of risk-based asset management and illustrate different models • Cases will highlight successful approaches for developing and applying a risk-based asset management strategy

6. Learning Objectives • Building working knowledge of key concepts and definitions in the area of risk-based AM • Developing an understanding specific models for risk-based AM • Gaining familiarity with successful approaches to linking components of risk management and asset management • Applying this knowledge to begin to answer the following questions: • What are the benefits that your DOT can expect from integrating risk management and asset management? • How does MAP-21 impact your agency’s approach to risk-based AM? • SHARE LESSONS LEARNED, IDEAS, KNOWLEDGE!!!

7. Shobna Varma, Gordon Proctor Applying Risk to the Management of Transportation Assets, A Series of FHWA Reports 1

8. Risk Management Reports • Reports examine how risk management complements Transportation Asset Management • They define and illustrate how risk can be applied 2

9. Risk Defined • Risk is the positive or negative effects of uncertainty or variability upon agency objectives. •  Risk management is the cultures, processes and structures that are directed towards the effective management of potential opportunities and threats. 3

10. Not All Risks Are Negative • Risk are more than just threats. They include: • Threats • Variability • Change • Uncertainty • Opportunity • This includes risks to achieving objectives, to customer satisfaction to sustaining infrastructure condition and performance 4

11. Risk Affects Many Areas • Risk can be anything that may impede an objective or create a new opportunity • Economic risks caused by prices • Decision risks caused by bad data, information • External risks such as climate • New opportunities such as new technology, materials or processes 5

12. MAP 21: A New Era • MAP-21 initiates a new era for U.S. transportation agencies focusing on: • Performance Management • Asset Management • Risk Management • States must develop risk-based, performance-based asset management plans for at least the NHS 6

13. A Complementary Process • Performance and Asset Management seek to ensure reliable, dependable processes and outcomes • The opposite of reliability is variability • Risk management seeks to reduce the variability of desired outcomes 7

14. Reports Illustrate Existing U.S. Examples • Risk can be managed at: • Information systems • Classes of critical assets • Climatic or seismic threats • Investment decisions • Changing legal or political requirements • Scalability • U.S. agencies commonly use risk at the project level • Risk can be scaled to program and agency level 8

15. 3 Levels of Risks • Agency risks • Risks to agency objectives, goals, • Organizational wide • Generally external including • Declining revenues • Lack of political support • Change in leadership • Aging infrastructure 9

16. Program Risks • Program risks • Bridge, pavement, maintenance risk • Data quality, availability • Poor project selection, preservation strategies • Inadequate forecasting • Loss of institutional knowledge through key personnel retirements 10

17. Project Risks • Project risks • Typically known types of risks including • Scope, schedule, costs • Cost overruns • Schedule delays • Unknown geotech, environmental or utility issues 11

18. Risks to Networks, Corridors • Inherently in MAP-21 is a risk-based focus first on the NHS and voluntarily on other networks • Overriding importance of NHS led to national emphasis upon it if trade offs have to be made • A corridor or network approach complements MAP-21 freight plan requirements 12

19. Higher Networks, Higher Risk • NCDOT example of setting higher asset targets for higher-priority networks • MAP-21 gives us an opportunity to demonstrate the difficult trade offs that DOTs are forced to make • A risk-based approach to decision making provides opportunity to explain, and educate, decision makers about trade offs being made 13

20. Managing Risks to Policies • Executives or boards can manage risks to their policies; • Policy risks are “owned” by executives • Tend not to lend themselves to formulaic solutions • “Managing risk” as a verb, an activity owned by the executive • Not all are threats; Some are opportunities 14

21. Building Resiliency into Assets • Risk-based asset management assists with key disaster-preparedness strategies • Redundancy as a strategy to assist with evacuations, recovery • Robustness as a means to ‘harden’ assets to cope with events • Resiliency as the ability to plan for, absorb and recover from events 15

22. Planning for the Unpredictable • Asset management policy ‘owners’ can expect increasing variability from climate • Risk management includes tools for planning for the unpredictable • TAM tools increase resiliency • Good asset inventories help with risk identification and repair after events 16

23. Analogs for Risk-Based TAM • Caltrans and Washington DOT’s prioritization of bridge assets for seismic retrofit • Use of asset inventories to predict flood-prone assets • Ability to model climate variability and its effects on assets • Rock fall programs as example for risk-based planning 17

24. Conclusion • As states develop risk-based asset management plans, the state examples could be useful • Although risk-based asset management sounds new, its principles are common to many agency practices • Also, risk is the complement to performance management • It helps manage the unpredictable 18

25. Integrating Risk into Decision Making at MnDOT Tim Henkel, Division Director Modal Planning and Program Delivery Minnesota Department of Transportation FHWA Risk Asset Management Webinar May 8, 2013

26. Today’s Discussion • The Emergence of Enterprise Risk Management at MnDOT • Applying Risk Management Analysis in Highway Investment Planning • Applying Risk Management Analysis in MnDOT’s first Transportation Asset Management Plan

27. Enterprise Risk Management (2008-present) • Risk management is a systematic approach to setting the best course of action under uncertainty. • Increasingly, performance-based needs far exceed projected resources. • Risk assessment is used as a tool to consider tradeoffs among competing objectives.

28. Better Roads for Minnesota (2011) • Early risk management efforts identified pavement as a “high risk” • Used a risk-based process to communicate how a programmatic investment can create worthwhile results by managing risks • Directed $398 million in released project contingency and recent bid savings to over 500 miles of roads in poor condition

29. District Risk Profiles (2010) • Purpose • Identify and assess unique risk conditions at district level • Evaluate the applicability of the statewide investment direction at the district level • Identify investment strategies to manage those risks to a tolerable level • Output • District risk profile • Common risks that inform MnSHIP Manage more? Tradeoffs Accept more?

30. Enterprise Risk Management Office (2012) • Charged with developing, promoting, and managing a formal and continuous process to identify, assess, prioritize and manage risk exposures and opportunities across the department • Chief Risk Officer: Eric Davis

31. Enterprise Risk Management Framework and Guidance (2013) Strategic-level risks: Impede the achievement of MnDOT’s vision, mission, and key results Business-Line-level risks: Impede the agency’s ability to deliver products and services, meet established performance targets, and accomplish our business objectives Project-level risks: Threaten the scope, schedule, cost, or quality of agency projects

32. MnDOT’s Family of Plans Multimodal Plan Investment Plans

33. Using Risk in Scenario Planning • Asset Management • Traveler Safety • CriticalConnections • Regional + Community Improvement Priorities • Project Support

34. FHWA Asset Management Plan Pilot Project • Three State DOTs developing their first TAMP as part of the initial pilot • Minnesota, Louisiana, New York • FHWA Consultant will work with the state DOTs to develop and execute a TAMP Work Plan

35. Elements of FHWA Work Plan 1) Asset Inventory and Conditions 2) Asset Management Objectives and Measures 3) Performance Gap Assessment 4) Lifecycle Cost Considerations 5) Risk Management Analysis 6) Financial Plan 7) Investment Strategies 8) Asset Management Process Enhancements

36. For Each of the Asset Type Selected, MnDOT Will … • 1) Establish a Baseline – Document Current Practices • 2) Establish Levels of Service, Performance Measures, and Targets • 3) Conduct System Risk Assessments within the Asset Group • 4) Conduct Programmatic and System Risk Assessments between Asset Groups • 5) Develop an Operations and Maintenance Plan to Minimize Lifecycle Costs

37. Thank You For further information contact Mark Nelson Mark.b.nelson@state.mn.us (651) 366-3794

38. AASHTO and FHWA Asset and Risk Management Webinar – may 8, 2013 FDOT Emergency Management: • Preparedness • Response • Recovery • Mitigation • Asset Maintenance Contracting

39. Preparedness Review and Update all Emergency Documents • Emergency Plans • Evacuation Routes • Damage Assessment (Assignments and Routes) • Others’ Involvement (RECON, EOC Liaisons, etc.) • Provide Update Training • Pre-Event Contracts (Advertise and Award) • Coordinate with Locals (Federal Guidelines)

40. Preparedness • Just Prior to the Event • Execute Pre-Event Contracts • Prepare Equipment and Personnel • Assign/Deploy Volunteers • Pre-stage Critical Teams (Damage Assessment, Pre-Event Contractors, etc.) • Safe Up Construction and Other Work Sites • Close Bridges (Moveable Bridges for Winds > 39 mph) • Accounting Process in Work Program • Emergency Declaration Process

41. Response • During and After the Event • Perform Initial Damage Assessment • Assign Detailed Damage Assessment Teams • Emergency Repair not covered by Pre-Event Contracting • Work with Local Governments for Eligible Reimbursements • Provide Oversight of Damage Repair Sites • Complete the Repair Work • Prepare and Submit Proper Documentation

42. F&A Management • ER/PA Process Flowchart

43. Asset Maintenance Contracting Re-Tooling Disaster Response • Long-term, performance-based contracting encompassing all (or most) maintenance functions required to serve the public and maintain the roadways within specific roadway corridors or geographical areas • Formerly called Asset Management

44. Change in Emergency Response • Asset Maintenance (AM) Contracts formerly included complete responsibility for hurricane response & recovery • Now, all AM Contracts only include limited responsibility • Why?

45. The FACTS • Overall, AM Contractors perform well in disaster response and cleanup • Already mobilized with an abundant amount of resources • Extensive knowledge and experience of the affected areas • Great majority of work was FHWA and/or FEMA reimbursable • Tremendous amount of paperwork, documentation, and “red tape” involved in getting the Federal money to the Contractor • In some cases, AM Contractor’s did not see Federal money (millions) for over 2 years

46. The Cause • 8 hurricane landfalls in two years – no one was completely ready for that • No single entity’s fault – everyone was partly to blame - FDOT, Contractor, Feds • Insufficient/Frustrating Communication • No consistency in documentation requirements – no one really knew what any other party wanted or needed

47. The Effect • In some cases, AM Contractor’s did not see Federal money (millions) for over 2 years • Major overhaul of AM Scope to exclude Post-Event activities • FDOT has to utilize “Pre-Event” Contracts within AM Contract Areas

48. Old Language Title - Incident Response Response & Deploy time defined in Scope Contractor responsible for all incidents/events Contractor not responsible for “act of terrorism” Must sumbit reports of incident response New Language Title - Emergency Management Open Roads Policy Used Categorizes into two classifications Clearly defined responsibilities Contraflow Added Contractor responsible & compensated for “act of terrorism” Removed 50% risk cap No Federal Reimbursement AM Scope - Summary of Differences

49. The Plan • FDOT is currently coordinating with the Feds to allow for either of the following: • Modify existing AM Scope to become Federally approved and eligible for reimbursements or; • Utilize AM Contractors to manage and administer FDOT’s Pre-Event Contracts for repair work within the AM Project Limits and Scope of Work.

50. Questions