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Analytics Magazine

Public policy: Potholes and politics

July/August 2011

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Aging infrastructure is everybodys problem: The need for optimization, not just more money.

Steve PalmerBy Steve Palmer

According to a World Economic Forum (WEF) study, America’s infrastructure has gotten worse over the past decade and has even fallen to a level that is inferior to some developing countries.

This begs the question, how much will it cost to repair aging infrastructure in North America? If there will never be enough money to repair infrastructure correctly, is there another approach to managing the resources and assets that we have to work with?

The American Society of Civil Engineers (ASCE) estimates it will require $2.2 trillion in spending over the next five years to repair the United States’ dilapidated infrastructure. Similarly, the Canadian Federation of Municipalities projected it would cost $123 billion to renew its aging infrastructure. With staggering budget deficits, it’s no wonder that the U.S. has consistently earned a “D” average in the ASCE’s Report Card for America’s Infrastructure — warranting the HISTORY channel to launch a new television series called “Inspector America,” which looks at what needs to be fixed in many major cities across the country.

Abundant Approaches, but Something’s Missing

Whether it is a neighborhood pothole, the leaky rooftops of Town Hall or the most trafficked bridge in the city, finding a solution to the burden of infrastructure repair has been a focus of federal, state and local officials.

In May, the Obama administration announced $2 billion in grants to build and improve intercity passenger-rail service. This, along with Obama’s highly debated Federal Infrastructure Bank is all part of the president’s “bold vision for renewing and expanding our nation’s infrastructure.”

At the state level, Massachusetts recently resurrected an approach that had not been offered in more than 20 years. With the availability of the “new” $1,000 Build Mass Bonds — a smaller denomination (compared to the typical $5,000 denominations), investing in the commonwealth’s infrastructure will now be accessible to more individuals. In a more intriguing approach to secure funding, the Toronto District School Board is retrofitting its facilities to offset a $3 billion backlog in roofing repairs by installing solar panels. These will enable the board to sell electricity to Ontario’s government-owned utility and make enough for the long-needed repairs.

While there is no wrong way to secure funding, what’s missing from the above examples is a long-term, optimized approach that will allow organizations to spend smarter, not just spend more. Current solutions for battling aging infrastructure focus on “how to secure more capital” — an approach that is extremely limiting and doesn’t address the long-term ramifications and solutions. The focus needs to instead be on “how to approach the problem differently,” so the entire maintenance and repair process becomes a more regular and sustainable activity.

Break the “Squeaky Wheel” Cycle

Addressing an immediate pain point such as the worst road or bridge in a city first is not only understandable; it has to a large degree become the accepted industry practice. However, the problem with fixing the “squeaky wheel” first each time and continually taking the “worst first” approach without analyzing the bigger picture presents a conundrum. Cities and municipalities are going to spend more money in the long-term on repairs that could have been easily avoided or mitigated by optimizing resources and extending the lifecycle of an asset, such as a highway or bridge, earlier.

No one would argue that managing a city’s infrastructure is a simple task; there are an infinite number of risks, deterioration factors and many asset types ranging from roads and bridges to municipality rooftops and street lamps to consider. Given that these variables often impact million-dollar spending decisions, cities, municipalities and any industry that handles numerous long-term assets have no leeway to leave money on the table that could be better invested elsewhere.

Stephen Stokes, vice president at IT analyst firm Gartner, noted in an April 2011 report, “asset-intensive enterprises need to focus on optimization of performance over the full life cycle of assets.” In a nutshell, applying the principles of asset lifecycle optimization to your infrastructure helps to enable long-term sustainability. Money saved through implementing an asset optimization framework, deciding what projects to prioritize to get the “biggest long-term bang for your buck,” and by grouping projects together within this framework can then be reinvested into other projects fall victim to “deferred maintenance costs.”

Potholes and politicsOld Problem, New Solution — and Proven Savings

With the economy on a slow rebound, most, if not all, infrastructure experts can attest to the overwhelming pressure to do more with less. Unfortunately, as less urgent infrastructure projects get put on the backburner, these deferred maintenance projects risk requiring a highly multiplied amount of capital to fix later. There is a small window of time when an asset in need of repair may jump from a “maintenance” project to a complete “rebuild” project, and research has shown that spending $1 to keep a road in a good condition prevents spending up to $7 to rebuild it in the future.

This critical window of time is often overlooked in the traditional approach to fixing roads and bridges as the available budget is typically allocated to “fix the worst first.” Cognizant of deferred maintenance projects piling up, the New Brunswick Department of Transportation (NBDoT) adopted a new approach for an old problem.

The NBDoT embraced long-term, investment-minded thinking for a cost-effective, sustainable plan for managing the province’s nearly 200-year-old infrastructure. As part of this plan, and working within the province’s budget of approximately $236 million, the NBDoT turned to a solution that enabled it to manage all of its infrastructure assets simultaneously (opposed to in silos with asset-specific solutions), perform various trade-off and what-if scenarios (that previous solutions were incapable of performing across the entire asset set) and more effectively optimize the lifecycle of each asset.

These assets include more than 11,185 miles (18,000 kilometers) of roads, 2,900 bridges and many other assets such as large culverts — each with unique complexities, different deterioration factors and traffic volumes that warrant different periods of maintenance and different price tags. The upkeep of these assets are further compromised when the department has to factor in an onerous amount of other factors including expanding or declining populations, budget changes and natural disasters.

Without a way to determine how addressing one asset impacts the lifecycle of others, the task of maintaining all of them becomes a prioritization quagmire. With the safety of New Brunswick’s more than 750,000 residents depending on a safe and modern transportation infrastructure, selecting the correct course of action cannot, and never should be, left to chance.
Understanding the need to consider millions of choices, many constraints and alternative courses of action simultaneously, NBDoT turned to Remsoft, a provider of asset lifecycle optimization software.

Through advanced analytics, modeling and spatial planning technology, Remsoft’s technology enabled the NBDoT to simplify complex, high-variable decisions to determine where to spend its budget while fueling long-term program and asset sustainability. Now, the NBDoT is able to at the right time and right place, invest $1 of preventative maintenance to avoid up to $7 of reconstruction on a proportionate basis. With the money saved over the long-term, these funds can be reinvested to improve other areas of deferred maintenance.

By adopting an asset lifecycle optimization practice, the NBDoT extended the life of its assets, spent more strategically and dramatically improved the condition and quality of its roads and bridges. Through this approach, approximately 746 fewer miles (1,200 fewer kilometers) of road were designated as poor condition than would have been the case using the previous method.

In taking a different approach to managing New Brunswick’s transportation infrastructure, the NBDoT has saved more than $210 million over the past three years. Projections call for a minimum of $1.4 billion to be saved over an approximate 20-year period.

Smarter Spending Trumps More Funding

With the more than $210 million that the NBDoT has saved over the past three years with its long-term and asset optimized approach to managing a modern transportation system, this capital has been re-invested into the province’s infrastructure for further improvements. The New Brunswick Department of Transportation has successfully executed this approach on a small scale, proving to other DOTs and municipalities around the world that spending smarter will ultimately enable them to accomplish more.

Unlike other civic plans that look for ways to generate more capital such as raising taxes or increasing tolls, this represents a major departure from the traditional approaches to managing aging infrastructure.

This issue is all about approaching America’s infrastructure problem from a long-term perspective that optimizes the lifecycle of existing assets. With the astronomical infrastructure improvement-related costs, perhaps authorities should spend a bit less time focused on securing more capital and complement these important efforts by spending more time focused on optimizing at a full system or network level what they have. A combination of many smart actions will lead to more sustainable outcomes.

Steve Palmer (steve.palmer@remsoft.com) is co-CEO of Remsoft. His primary focus is on corporate strategy, finance and on expanding the companys growth in the areas of business intelligence and advanced analytics. Prior to joining Remsoft, Palmer worked in the technology sector, most notably as chief operating officer for Whitehill Technologies where he played a key role in growing Whitehill into the fifth largest private software company in Canada. As a member of the New Brunswick Department of Transportation team that was a finalist for the 2010 Franz Edelman Award, he was named an Edelman Laureate by the Institute for Operations Research and the Management Sciences (INFORMS).

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