Application of Portfolio Theory and Sustainability Metrics to Civil Infrastrastructure Management

Georgia Tech Research Corporation, Atlanta GA

Investigators

Abstract

State and local governments invest approximately $150 billion annually in the construction, improvement and rehabilitation of capital assets. In the past four decades, several states have developed decision support systems to facilitate the management of their physical infrastructures such as pavements, bridges and public transit infrastructure. The primary objective of these infrastructure management systems is to assist public works agencies with identifying the most cost-effective investments for limited budgets. The infrastructure management systems have been used primarily for a priori planning and less for posteriori analyses either to validate existing models or assess the cumulative value of investments. In 1999, the Government Accounting Standards Board (GASB) introduced a requirement for state and local government financial reporting using full accrual-based accounting practices such as are used in private industry. This approach covers all capital assets and long term liabilities including civil infrastructure, and requires the depreciation of assets unless two distinct criteria are met: 1. The government manages the infrastructure assets using an asset management system; and 2. The government demonstrates that the infrastructure assets are being preserved at, or above, a condition level originally established. The GASB requirement reflects the growing importance of managing civil infrastructure as assets. In this research project, a focused body of knowledge and analytical tools for portfolio asset management for civil infrastructure will be developed using Portfolio Theory. Existing infrastructure management systems will be integrated into more comprehensive asset management systems. Research results will be used to design a prototype asset management system from independent infrastructure management systems for highways, bridges and public transit facilities, to demonstrate how one would comprehensively value these assets as a portfolio, analyze tradeoffs for competing alternatives under uncertainty, and identify superior alternatives based on the expected value of the portfolio. The education plan will support practitioner needs for asset management as well. Research results will be used to extend the curriculum in Civil and Environmental Engineering at Georgia Tech to include quantitative theory and tools for integrated asset management of civil infrastructure, and to develop a short course on asset management for practitioners. Furthermore, it breaks new ground by introducing the paradigm of portfolio asset management for managing civil infrastructure and opens the way for subsequent applications of Portfolio Theory to civil infrastructure management