Investment decision framework for infrastructure asset management: a probability-based approach

Australia’s civil infrastructure assets of roads, bridges, railways, buildings and other structures are worth billions of dollars. Road assets alone are valued at around A$ 140 billion. As the condition of assets deteriorate over time, close to A$10 billion is spent annually in asset maintenance on Australia's roads, or the equivalent of A$27 million per day. To effectively manage road infrastructures, firstly, road agencies need to optimise the expenditure for asset data collection, but at the same time, not jeopardise the reliability in using the optimised data to predict maintenance and rehabilitation costs. Secondly, road agencies need to accurately predict the deterioration rates of infrastructures to reflect local conditions so that the budget estimates could be accurately estimated. And finally, the prediction of budgets for maintenance and rehabilitation must provide a certain degree of reliability. A procedure for assessing investment decision for road asset management has been developed. The procedure includes: • A methodology for optimising asset data collection; • A methodology for calibrating deterioration prediction models; • A methodology for assessing risk-adjusted estimates for life-cycle cost estimates. • A decision framework in the form of risk map

Strategy for the development of investment decision-making framework for road asset management for queensland department of main roads

The aim of this project is to develop a systematic investment decision-making framework for infrastructure asset management by incorporation economic justification, social and environmental consideration in the decision-making process. This project assesses the factors that are expected to provide significant impacts on the variability of expenditures. A procedure for assessing risk and reliability for project investment appraisals will be developed. The project investigates public perception, social and environmental impacts on road infrastructure investment. This research will contribute to the debate about how important social and environmental issues should be incorporated into the investment decision-making process for infrastructure asset management.

International practices in investment decision making in road sector

This document provides the findings of an international review of investment decision-making practices in road asset management. Efforts were concentrated on identifying the strategic objectives of agencies in road asset management, establishing and understanding criteria different organisations adopted and ascertaining the exact methodologies used by different countries and international organisations. Road assets are powerful drivers of economic development and social equity. They also have significant impacts on the natural and man-made environment. The traditional definition of asset management is “A systematic process of maintaining, upgrading and operating physical assets cost effectively. It combines engineering principles with sound business practices and economic theory and it provides tools to facilitate a more organised, logical approach to decision-making” (US Dept. of Transportation, 1999). In recent years, the concept has been broadened to cover the complexity of decision making, based on a wider variety of policy considerations as well as social and environmental issues rather than is covered by Benefit-Cost analysis and pure technical considerations. Current international practices are summarised in table 2. It was evident that Engineering-economic analysis methods are well advanced to support decision-making. A range of tools available supports performance predicting of road assets and associated cost/benefit in technical context. The need for considering triple plus one bottom line of social, environmental and economic as well as political factors in decision-making is well understood by road agencies around the world. The techniques used to incorporate these however, are limited. Most countries adopt a scoring method, a goal achievement matrix or information collected from surveys. The greater uncertainty associated with these non-quantitative factors has generally not been taken into consideration. There is a gap between the capacities of the decision-making support systems and the requirements from decision-makers to make more rational and transparent decisions. The challenges faced in developing an integrated decision making framework are both procedural and conceptual. In operational terms, the framework should be easy to be understood and employed. In philosophical terms, the framework should be able to deal with challenging issues, such as uncertainty, time frame, network effects, model changes, while integrating cost and non-cost values into the evaluation. The choice of evaluation techniques depends on the feature of the problem at hand, on the aims of the analysis, and on the underlying information base At different management levels, the complexity in considering social, environmental, economic and political factor in decision-making is different. At higher the strategic planning level, more non-cost factors are involved. The complexity also varies based on the scope of the investment proposals. Road agencies traditionally place less emphasis on evaluation of maintenance works. In some cases, social equity, safety, environmental issues have been used in maintenance project selection. However, there is not a common base for the applications.

Review on Australian and international practices for asset management in building infrastructure

Both in developed and developing economies, major public funding is invested in civil infrastructure assets. Efficiency and comfort level of expected and demanded living standards are largely dependant on the management strategies of these assets. Buildings are one of the major & vital assets, which need to be maintained primarily to ensure its functionality by effective & efficient delivery of services and to optimize economic benefits. Not withstanding, public building infrastructure is not considered in Infrastructure report card published by Australian Infrastructure Report Card Alliance Partners (2001). The reason appears to be not having enough data to rate public building infrastructure. American Infrastructure Report Card (2001) gave “School Buildings” ‘d-’ rating, which is below ‘poor’. For effective asset management of building infrastructure, a need emerged to optimise the budget for managing assets, to cope up with increased user expectations, to response effectively to possible asset failures, to deal with ageing of assets and aging populations and to treat other scenarios including technology advancement and non-asset solutions. John (Asset Management, 2001) suggests that in the area of asset management worldwide, UK, Australia and New Zealand are leading.

National practices in investment decision making in road sector

This document provides the findings of a national review of investment decision-making practices in road asset management. Efforts were concentrated on identifying the strategic objectives of agencies in road asset management, establishing and understanding criteria different organisations adopted and ascertaining the exact methodologies used by different sate road authorities. The investment objectives of Australian road authorities are based on triple-bottom line considerations (social, environmental, economic and political). In some cases, comparing with some social considerations, such as regional economic development, equity, and access to pubic service etc., Benefit-Cost Ratio has limited influence on the decision-making. Australian road authorities have developed various decision support tools. Although Multi-Criteria Analysis has been preliminarily used in case by case study, pavement management systems, which are primarily based on Benefit Cost Analysis, are still the main decision support tool. This situation is not compatible with the triple-bottom line objectives. There is need to fill the gap between decision support tools and decision-making itself. Different decision criteria should be adopted based on the contents of the work. Additional decision criteria, which are able to address social, environmental and political impacts, are needed to develop or identify. Environmental issue plays a more and more important role in decision-making. However, the criteria and respective weights in decision-making process are yet to be clearly identified. Social and political impacts resulted from road infrastructure investment can be identified through Community Perceptions Survey. With accumulative data, prediction models, which are similar as pavement performance models, can be established. Using these models, the decision-makers are able to foresee the social and political consequences of investment alternatives.

Investment decision-making under risk (reliability) and uncertainty for infrastructure asset management

Risks and uncertainties are inevitable in engineering projects and infrastructure investments. Decisions about investment in infrastructure such as for maintenance, rehabilitation and construction works can pose risks, and may generate significant impacts on social, cultural, environmental and other related issues. This report presents the results of a literature review of current practice in identifying, quantifying and managing risks and predicting impacts as part of the planning and assessment process for infrastructure investment proposals. In assessing proposals for investment in infrastructure, it is necessary to consider social, cultural and environmental risks and impacts to the overall community, as well as financial risks to the investor. The report defines and explains the concept of risk and uncertainty, and describes the three main methodology approaches to the analysis of risk and uncertainty in investment planning for infrastructure, viz examining a range of scenarios or options, sensitivity analysis, and a statistical probability approach, listed here in order of increasing merit and complexity. Forecasts of costs, benefits and community impacts of infrastructure are recognised as central aspects of developing and assessing investment proposals. Increasingly complex modelling techniques are being used for investment evaluation. The literature review identified forecasting errors as the major cause of risk. The report contains a summary of the broad nature of decision-making tools used by governments and other organisations in Australia, New Zealand, Europe and North America, and shows their overall approach to risk assessment in assessing public infrastructure proposals. While there are established techniques to quantify financial and economic risks, quantification is far less developed for political, social and environmental risks and impacts. The report contains a summary of the broad nature of decision-making tools used by governments and other organisations in Australia, New Zealand, Europe and North America, and shows their overall approach to risk assessment in assessing public infrastructure proposals. While there are established techniques to quantify financial and economic risks, quantification is far less developed for political, social and environmental risks and impacts. For risks that cannot be readily quantified, assessment techniques commonly include classification or rating systems for likelihood and consequence. The report outlines the system used by the Australian Defence Organisation and in the Australian Standard on risk management. After each risk is identified and quantified or rated, consideration can be given to reducing the risk, and managing any remaining risk as part of the scope of the project. The literature review identified use of risk mapping techniques by a North American chemical company and by the Australian Defence Organisation. This literature review has enabled a risk assessment strategy to be developed, and will underpin an examination of the feasibility of developing a risk assessment capability using a probability approach.

Debate on statutory control of the surveying profession in Queensland : 1907 to 1975

This article was written in 1997. After a 2009 review the content was left mostly unchanged - apart from this re-written abstract, restructured headings and a table of contents. The article deals directly with professional registration of surveyors; but it also relates to government procurement of professional services. The issues include public service and professional ethics; setting of professional fees; quality assurance; official corruption; and professional recruitment, education and training. Debate on the Land Surveyors Act 1908 (Qld) and its amendments to 1916 occurred at a time when industrial unrest of the 1890s and common market principles of the new Commonwealth were fresh in peoples’ minds. Industrial issues led to a constitutional crisis in the Queensland’s then bicameral legislature and frustrated a first attempt to pass a Surveyors Bill in 1907. The Bill was re-introduced in 1908 after fresh elections and Kidston’s return as state premier. Co-ordinated immigration and land settlement polices of the colonies were discontinued when the Commonwealth gained power over immigration in 1901. Concerns shifted to protecting jobs from foreign competition. Debate on 1974 amendments to the Act reflected concerns about skill shortages and professional accreditation. However, in times of economic downturn, a so-called ‘chronic shortage of surveyors’ could rapidly degenerate into oversupply and unemployment. Theorists championed a naïve ‘capture theory’ where the professions captured governments to create legislative barriers to entry to the professions. Supposedly, this allowed rent-seeking and monopoly profits through lack of competition. However, historical evidence suggests that governments have been capable of capturing and exploiting surveyors. More enlightened institutional arrangements are needed if the community is to receive benefits commensurate with sizable co-investments of public and private resources in developing human capital.

Assessing the impact of streetscape on residential property in lower to middle socio-economic areas

A number of factors have been shown to influence residential property prices in various locations. Studies have identified the importance of location in relation to services, transport and proximity to negative factors such as power lines and cell phone towers. Often the socio-economic status of a residential precinct can determine the overall quality and nature of the streetscapes in that area, with higher value suburbs or locations offering a better visual appearance compared to areas where these factors are not present. However, does the same value for a good streetscape apply in lower socio-economic areas or a buyers more motivated by less aesthetic factors such as size of the house, construction materials or land size. This paper analyses specific streets in a lower to middle socio-economic suburb of Christchurch New Zealand to determine if the location of a house in a street with good streetscape appeal has greater value, investment performance and saleability compared to adjoining streets with less aesthetic appeal.

Public awareness of ‘green’ residential property – an empirical survey based on data from New Zealand and Germany

Over the last few years more stringent environmental laws (e.g. the German “Energie¬ein-sparverordnung ENEV” - Energy Performance of Buildings Directive) and soaring energy prices has increased the need for the real estate industry to react and participate in overall energy reduction through efficient house construction and design, as well as upgrading the existing housing stock to be more energy efficient. Therefore the Property Economics Group at Queensland University of Technology in Australia and Nuertingen-Geislingen University in Germany are carrying out research in relation to sustainable housing construction and public awareness of “green” residential property. Part of this research is to gain an understanding of the level of knowledge and importance of these issues to the house buyer and to determine the importance of sustainable housing to the general public. The paper compares data from two different empirical studies; one of studies analyzes the situation in New Zealand, the other is focused on Germany.

The impact of property title type on residential property returns

Residential property in New Zealand comprises both freestanding residential properties and medium to high density residential properties. Medium to high density residential property comprises the typical units, townhouses and semi-detached houses common in most residential property markets. However, in many of the larger cities of New Zealand the free standing residential property market has evolved into two separate markets being freehold residential property and cross lease residential property. Cross leases have developed as a form of infill housing to reduce the urban sprawl in major canters, while reducing the time and cost for residential property developers. A cross lease is created when an existing freestanding residential property subdivides a portion of the existing land for the erection of another house on the original title, basically dividing one larger residential section into two smaller residential blocks. This paper will analyse house prices in Christchurch over the period 1992 to 2006 to determine if the various housing markets have shown similar capital returns or if there is a specific preference for a particular residential property title.

Contrasting views and experiences of health professionals on the management of comorbid substance misuse and mental disorders

Objectives: To determine opinions and experiences of health professionals concerning the management of people with comorbid substance misuse and mental health disorders. Method: We conducted a survey of staff from mental health services and alcohol and drug services across Queensland. Survey items on problems and potential solutions had been generated by focus groups. Results: We analysed responses from 112 staff of alcohol and drug services and 380 mental health staff, representing a return of 79% and 42% respectively of the distributed surveys. One or more issues presented a substantial clinical management problem for 98% of respondents. Needs for increased facilities or services for dual disorder clients figured prominently. These included accommodation or respite care, work and rehabilitation programs, and support groups and resource materials for families. Needs for adolescent dual diagnosis services and after-hours alcohol and drug consultations were also reported. Each of these issues raised substantial problems for over 70% of staff. Another set of problems involved coordination of client care across mental health and alcohol and drug services, including disputes over duty of care. Difficulties with intersectoral liaison were more pronounced for alcohol and drug staff than for mental health. A majority of survey respondents identified 13 solutions as practical. These included routine screening for dual diagnosis at intake, and a range of proposals for closer intersectoral communication such as exchanging client information, developing shared treatment plans, conducting joint case conferences and offering consultation facilities. Conclusions: A wide range of problems for the management of comorbid disorders were identified. While solution of some problems will require resource allocation, many may be addressed by closer liaison between existing services.

An Analysis of UK Farmland : 1981-2004

The importance of agriculture in many countries has tended to reduce as their economies move from a resource base to a manufacturing industry base. Although the level of agricultural production in first world countries has increased over the past two decades, this increase has generally been at a less significant rate compared to other sectors of the economies. Despite this increase in secondary and high technology industries, developed countries have continued to encourage and support their agricultural industries. This support has been through both tariffs and price support. Although the average farm production property may require this support to maintain long-term production, the better farms can actually achieve production levels and commodity prices that result in these units being competitive on a free market basis. This paper will analyse the total return performance of UK farmland over the period 1981-2004. This analysis will compare the total return from rural properties in the UK and compare this performance to commercial property returns (total, office, retail, industrial), equities and gilts over this 24-year period. The analysis will be based on the IPD UK let land index and the IPD property index. The portfolio diversification and risk-reduction benefits of UK farmland will be highlighted. The analysis shows that rural property has negative correlations with equities and gilts, as well as insignificant positive correlations with retail, industrial and office property. Rural property also provides portfolio diversification benefits.

The role of rural land in mixed asset investment portfolios

Rural land has not always been considered as a major long-term investment with both institutional investors and absentee owners in countries such as U.K. and Australia. Although rural land is included in both single asset and mixed asset portfolios in the U.S, it is not at the same levels as either commercial or industrial property. Rural land occupies over 50% of the total area of Australia, and comprises over 115,000 economic farm properties (excludes rural residential, hobby farms and rural lifestyle blocks. However, less than 1.6% of the total economic farm numbers are actually owned by corporate or institutional investors. This low level of corporate involvement in the Australian rural property market has limited both the investment performance research and inclusion of this rural land type in both property and mixed asset investment portfolios. In the U.S. rural land is also the most extensive real estate type based on total area occupied. The United States Department of Agriculture statistics (1998) show that in 1997 there were 2.06 million farms in the U.S., covering 968 million acres, with a total value of $912 billion and generating an annual income of $202 billion. The level of corporate ownership of farms in the U.S. is also higher than the level of corporate farm ownership in Australia. This high level of institutional ownership in rural land in U.S has provided the opportunity for the rural property asset class to be analysed in relation to it’s investment performance and possible role in a mixed asset or mixed property investment portfolio.

Total rural land performance in a free trade economy

The importance of agriculture in many countries has tended to reduce as their economies move from a resource base to a manufacturing industry base. Although the level of agricultural production in first world countries has increased over the past two decades, this increase has generally been at a less significant rate compared to other sectors of the economies. Despite this increase in secondary and high technology industries, developed countries have continued to encourage and support their agricultural industries. This support has been through both tariffs and price support. Following pressure from developing economies, particularly through the World Trade Organisation (WTO), GATT Uruguay round and the Cairns Group Developed countries are now in various stages of winding back or de-coupling agricultural support within their economies. A major concern of farmers in protected agricultural markets is the impact of a free market trade in agricultural commodities on farm incomes and land values. This paper will analyse the capital and income performance of the NSW rural land market over the period 1990-1999. This analysis will be based on land use and will compare the total return from rural properties based on world agricultural commodity prices.

Trajectories of broadband : the coming, going and return of broadband

As the paper’s subtitle suggests broadband has had a remarkably checkered trajectory in Australia. It was synonymous with the early 1990s information superhighway and seemed to presage a moment in which “content is [to be] king”. It disappeared almost entirely as a public priority in the mid to late 1990s as intrastructure and content were disconnected in services frameworks focused on information and communication technologies. And it came back in the 2000s as a critical infrastructure for innovation and the knowledge economy. But this time content was not king but rather an intermediate input at the service of innovating industries and processes. Broadband was a critical infrastructure for the digitally-based creative industries. Today the quality of the broadband infrastructure in Australia—itself an outcome of these different policy frameworks—is identified as “fraudband” holding back business, creativity and consumer uptake. In this paper I use the checkered trajectory of broadband on Australian political and policy horizons as a stepping off point to reflect on the ideas governing these changing governmental and public settings. This history enables me to explore how content and infrastructure are simultaneously connected and disconnected in our thinking. And, finally, I want to make some remarks about the way communication, particularly media communication, has been marginally positioned after being, initially so apparently central.