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Asset Management Strategies to Optimize Transportation Investment

Asset Management Strategies to Optimize Transportation Investment. By Prof S Khasnabis Wayne State University, Detroit, USA. Fulbright Research Scholar 2004 Visiting Faculty, Indian Institute Of Technology Bombay, India Presentation At Bengal Engineering and Science University, Shibpore

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Asset Management Strategies to Optimize Transportation Investment

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  1. Asset Management Strategies to Optimize Transportation Investment By Prof S Khasnabis Wayne State University, Detroit, USA. Fulbright Research Scholar 2004 Visiting Faculty, Indian Institute Of Technology Bombay, India Presentation At Bengal Engineering and Science University, Shibpore 29th November 2004

  2. United States Educational Foundation In India (USEFI) Educational Information Center Affiliated with the Bureau of Educational and Cultural Affairs of the US Dept. of State. Promote Mutual Understanding Between People of India and USA. Educational / Cultural Exchange of Scholars Professionals and Students.

  3. USEFI …Cont.. • Also known as Fulbright Commission. • Enables Research, Lectures and Studies • Administration of Fullbright fellowship for Indian and American Citizens • Promotion of Educational exchange among Fulbrighters and their Communities • Educational advising for students interested in higher education in US, the most preferred destination of Indian students going abroad. (approximately 75000 currently enrolled in US Universities)

  4. USEFI (Location) • Headquarter: New Delhi • Regional: Chennai, Kolkata, Mumbai • Website: www.fulbright_india.com • Satellite Locations: Ahmedabad, Bangalore, Hyderabad and Manipal.

  5. USEFI Cont……. • Autonomous body formed by the US Congress. • 1950 Bilateral Agreement: Board of Directors • 5 from US nominated by US ambassador • 5 from INDIA nominated by Govt. of India • Over 7350 Fulbright Fellowships to Indians and Americans since 1950 (Sponsored by Dept. of State). • An Additional 8000 Fellowships by other US Govt. Agencies.

  6. Fulbright Program • Established in 1946 • Legislation introduced by Senator J W Fulbright • Created a large Cultural and Academic network world wide • Operates in 140 countries

  7. Fulbright Program Cont.. Collaborates with • Fulbright Foreign Scholarship Board • US Dept. of State • Institute of International Education • Council for International Exchange of Scholars • US Dept. of Education

  8. Asset Management (AM) a)A Systematic Process Of Infrastructure Management Constructing Maintaining Upgrading b) Organized Approach Of Investment Decision Sound Engineering Techniques Robust Economic Principles Uncertainty and Risk of Investment

  9. Asset Management • Private Industry • Public Sector • Public Private Partnership • A Broad Emerging Field • Forerunners: Australia France New Zealand UK USA Singapore Hong Kong India

  10. Objectives • Develop an Analytic Framework to test AM Strategies • Identify Transportation (Infrastructure) Progress • Identify data needs • Collect Data • Conduct Preliminary Analysis

  11. Past and Current AM Projects at Wayne State University • Transit Fleet Management ( Project-1) Nationwide Need:$1.5 billion/year Michigan’s Role 85 Agencies 80:20 Federal : Local Funds Question: Purchase Vs Rehabilitation Vs Remanufacturing(?)

  12. Project 1:Cont…… Two Sequential Models Model1: Distribute Resources Among Three Programs 1.To Minimize Total Cost Subject to fleet life and other constraints Or 2.To maximize fleet life subject to budgetary and other constraints

  13. Model2: Allocate Resources(Model1 Output) Among Agencies to Maximize Remaining Life, Subject to different Constraints Funded By US Dept. Of Transportation & University Of Wisconsin

  14. Model 1 • Objective function: • Maximize Weighted Fleet Life = (X1l1)ΣX + …… + (X4l4)ΣX Subject to: C1X1 + ….. + C4X4 < Budget ΣX = Demand (for new buses) Xi> 0 (non-negative)

  15. Model 2 • Uses Model 1 results and the current age distribution of the fleet in terms of remaining life (RL) RL = amount of life left until MNSL Concept: As REPL/REHAB/REMANF buses are added to the fleet the distribution changes, increasing the weighted average remaining (WARL) life of a bus in the peer group

  16. Model 2 WARL • “Health Index” for peer group • Medium sized range: 0 < WARL < 7 • Taken as the weighted average of the entire distribution matrix

  17. Model 2 • Existing Weighted Average Remaining Life (EWARL), similar to WARL but at the agency level • Optimization: Based on premise that the EWARL will increase as REPL/REHAB/REMANF are added to agencies fleets

  18. Model 2 • Addition will result in a New WARL (NWARL) for the agency • Therefore, objective function will be to maximize the sum of the NWARL for all the agencies • Constraints will be from Model 1 results and additional user constraints

  19. Application • Peer Group of 93 agencies (1, 2…..93) (similar to actual data in Michigan) • Total fleet size of 720 medium buses • Has 235 buses with RL of 0 years, at $81,540/bus = $19.16 M Budget projections from MDOT.

  20. Application • Only have funds for 71 buses, $5.79 M • Same four programs described earlier • 7 year planning horizon • Must first allocate funds among four programs for first year.

  21. Model 1 Results • For $5.79 M, the 235 bus demand can be satisfied by: • Replacement (REHAB 1)(2 yrs) =107 buses • Remanufacture (REMANF)(4yrs)=128 buses Now must allocate program funds among remaining 6 years while accounting for maturation.

  22. Model 1 Results • For 7 year projection must adopt policy directives to address limited additional life: • A vehicle can only be rehabilitated two consecutive times • A vehicle can only be remanufactured one time • Can rehabilitate then remanufacture

  23. Model 1 Results

  24. Model 2 • EWARL for each agency is shown • TEWARL = 225.23 years, before any allocation • Can only give 107 REHAB 1 and 128 REMANF • Can not have any expansion buses • WARL for the peer group = 2.68 years (entire matrix)

  25. Distribution of RL Before Allocation

  26. Model 2 results • WARL for peer group = 3.69 years • TNWARL = 376.72 years • Each agency has a new individual EWARL (termed NWARL) • All buses with RL 0 years are “replaced”

  27. Distribution of RL After Allocation

  28. Evaluation of Proposed Strategy • Based on improvement proposed strategy brings to fleet compared to current practice • Measured fleet quality by WARL (Health Index) • Method: Convert WARL into dollar value and compute Net Present Worth

  29. Current Practice Projection

  30. Comparative Analysis WARL Current Practice vs. Proposed Procedure

  31. Comparative Analysis: Net Present Worth Calculation • Present Worth of Savings: $ 20,969,440 • Present Worth of Deficit: $ 9,257,095 • Net Present Worth = $ 11,712,345 • Positive value implies initial deficits are compensated by higher quality of fleet

  32. Observations • Able to satisfy bus replacement needs through means other than new buses (can be used for any size bus) • Able to distribute funds among agencies • Able stay within budget • Able to provide “higher quality” of fleet compared to current practice

  33. Project 2:Safety Improvement for Urban Arterials in SE Michigan • Nationwide over 40,000 fatalities/yr (US) • Estimated Loss: $250 billion plus/yr • Michigan (11 million population) has its own share • Focus Area : Urban intersections in SE Michigan (Over 50% of states population)

  34. Project 2: Cont… • Questions to be investigated: How should safety investments be made(?) What type of improvements(?) What analytic technique(?) Development of Guidelines Funded by Michigan Department of Transportation

  35. Map of Detroit Metro Area

  36. Project 3: Public Private Partnership on A Complex Multidirectional Project • Project Description 1. A third river crossing between Detroit (MI,USA) and Windsor (Ontario, CA) 2.A large number of agencies involved 3.Largest Trade Corridor, between USA and CANADA 4. NAFTA Consequences 5.Need for 3rd Crossing 6.Capacity Vs Customs Problem 7.High Truck Percentage and High Truck Traffic 8. Border Security

  37. Project 3: Cont… • Location(?) • Bridge Vs Tunnel(?) • Who will Build Own and Prepare(?) • Private Industry: Very Little Precedence • State Reluctant to Invest ($250m) • BOOT Approach is suggested • Long Term Revenue Funded By Wayne State Univ. Center of Legal Studies

  38. Typical BOOT Corporate Structure Source :Financing and Managing Infrastructure Projects by Merna and Nirju, Asia Law and Practice

  39. Typical Project Cashflow for BOOT Projects Source : Financing and Managing Infrastructure Projects by Merna and Nirju, Asia Law and Practice

  40. Michigan Transportation State AM Council • 11 member Council established by the state Legislature • Members: Those who own Roadway Infrastructure • Michigan: State DOT 83 Road Commissions 535 Cities/ Townships A total of 619 separate agencies 62% of agencies own less than 25miles 225 agencies own less than 10miles

  41. Michigan Transportation AM Council • Council to make Necessary Recommendations on Future Pavement and Bridge Investment Decisions • Legality may Need to be Tested in Court

  42. Potential Projects In India • Mumbai-Pune Toll Expressway • Bandra-Worli Sea Link • MUTP/World Bank Projects • Frame work to encourage Private participation • DMRC Program

  43. Acknowledgement • Wayne State University Group • Prof. R.D.Ellis • Prof. P.A.Brinkman • Joe Bartus, M.S Student • Lori Goe Prez. Student • Dr. K.Kar, Post Graduate Fellow • Transportation Systems Engineering (TSE) Group, • Indian Institute of Technology, Bombay • Prof. S.L.Dhingra • Prof. K.V.K. Rao • Prof. V.M.Tom • Sabyasachee Mishra, M.Tech Student

  44. THANK YOU

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