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The National Academies

NCHRP 13-06 [Anticipated]

Development of an Automated Tool to Assist in the Formulation and Maintenance of Long Range Equipment Replacement Plans

  Project Data
Source: AASHTO Highway Subcommittee on Maintenance
Funds: $400,000
Staff Responsibility: Amir N. Hanna
Fiscal Year: 2017

This project has been tentatively selected and a project statement (request for proposals) is expected in July 2016. The project statement will be available on this world wide web site. The problem statement below will be the starting point for a panel of experts to develop the project statement.

State highway agency equipment fleets are vital assets to the delivery of agency programs, projects, and services. Integrating asset management strategies, including the development of long-range replacement plans, is needed to maximize the use of available funding. State highway agency equipment fleet managers are responsible for making complex decisions related to equipment replacement that have major long-term fiscal impacts to fleet operations as well as impacts to state highway agency productivity and their ability to meet program goals. There is a great need to make the most informed decisions for efficiency and to better communicate the long-range impact from different equipment management decisions. Typically, an equipment replacement plan is a living document that identifies candidate equipment replacements using established replacement criteria usually for a 1- to 2-year period. Longer term equipment replacement projections can be prepared, but an established means for scenario-based planning is lacking. Pavement managers have such automated long-range, scenario-based tools that provide analysis of the impact of funding scenarios on pavement condition throughout the planning period. Fleet managers are in need of an analogous tool for long-range fleet replacement planning.

NCHRP Project 20-07/Task 309, “Challenges and Opportunities: A Strategic Plan for Equipment Management Research” (referred to as the Equipment Research Roadmap), calls out the need for research on long-range equipment replacement planning. The automated tool resulting from this research will allow fleet managers and decision makers to optimize replacement strategies and to better communicate the long range impact from various equipment management decisions. Without this tool, state highway agencies may underestimate and thus underfund these assets without fully understanding the impacts. Once these assets have been underfunded, a backlog of equipment replacement needs develops and can grow exponentially. Once a backlog develops, equipment costs increase significantly and state highway agency productivity decreases.

The objective of this research is to provide an automated tool to assist in the formulation and maintenance of long-range equipment replacement plans based on using highway agency fleet equipment asset historical cost, usage data, established life cycle criteria, and funding levels information. This tool should be able to project these plans using different scenarios with multiple inputs such as funding, inflation, fleet composition, fleet size, etc. This tool will be used to optimize replacement strategies and to better communicate the long-range impact from different equipment management decisions. The automated, computer-based process should have the capability to incorporate the optimized replacement cycles being developed under NCHRP Project 13-04, “Guide for Optimal Replacement Cycles of Highway Operations Equipment.”

In order to achieve this objective, the following tasks are required: (1) conduct a literature review and synthesis of completed and active research in the area of long-range equipment replacement planning and scenario-based analysis including both public and private fleets with heavy equipment similar to state fleet composition; (2) conduct a synthesis of the current equipment replacement planning/practices (long range or single year) and scenario-based analysis used in highway agency equipment fleets and document best practices identified; (3) conduct a survey of state DOTs’ equipment fleet managers to determine what problems, needs, and concerns they in developing long-range equipment replacement plans and scenario-based analysis; (4) using information collected in Tasks 1, 2, and 3, develop a process to incorporate the necessary factors to produce long-range equipment replacement plans and scenario-based analysis for highway agencies’ total fleet and for each of the various classifications of equipment in the agencies’ fleets; and (5) provide a computer-based solution that highway agencies’ fleet managers can utilize to upload their data and run the various scenarios to determine their long-range replacement plans based on the process developed in Task 4. The option to upload customized replacement criteria or other needed data is required. The solution must provide a standard process using normal office hardware that can be used by all highway agency equipment fleets. The process of uploading data into the solution must be in a manner such that it can easily be performed by typical highway agency equipment fleet management staff without the assistance of information technology professionals.

A successful tool will have the following capabilities: (a) Produce equipment replacement plans that quantify long-term replacement costs including the ability to model future changes in fleet capital (including adjustments for inflation) associated with future changes in fleet size, replacement cycles, mission needs, technology (e.g., emission reduction requirements) and/or fuel-type changes and resulting cost increases, and asset ages. Time horizon length shall be configurable from 1 to 25 years. (b) Account for other than like-for-like replacement, i.e., change in fleet composition. (c) Quantify equipment replacement backlog and the rate of increase or decrease at configurable funding levels. (d) Provide a process for evaluating the effects of scenarios such as deferring or accelerating specific equipment units on the leveling of needing funds on a multi-year basis. The specific equipment units shall be configurable. (e) Conversely, the solution shall suggest equipment units in need of replacement to be deferred or accelerated in order to achieve configurable funding scenarios. Parameters related to the deferment or acceleration shall be configurable. (f) Provide a reliable basis for developing replacement rates in a sinking-fund business model to ensure that rates account for future needs including capital costs, fleet asset mix changes, or the cost of new technology. (g) Be compatible for modeling and comparing the economic and fiscal impacts of alternative capital financing approaches such as outright cash purchase, a sinking fund, debt financing, and leasing.
 
Note: The AASHTO Standing Committee on Research directed that this research be coordinated with the work being performed under NCHRP Project 13-04, “Guide for Optimal Replacement Cycles of Highway Operations Equipment.”

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