Asset Management: a Framework for Unlocking the Value of Infrastructure

Roads and bridges and utilities should be financed, built and managed as the assets they are.
by | July 24, 2013

Only in the world of government accounting would tens of billions of dollars in capital assets -- roads, sewers, utilities and other major infrastructure -- be seen as liabilities. As the public sector continues to feel the fiscal strain of building, operating and maintaining this infrastructure, public leaders too often yield to the temptation to either ignore the decay or to go to the other extreme: selling or leasing out the resource and using a onetime payoff to patch a budget hole.

However, if governments employed a true capital budgeting approach, this infrastructure would be better understood as the asset it is and appropriately managed as such. Such an explicit asset management framework could help governments ensure a successful approach to issues ranging from contract design to legal barriers. Success requires quality leadership and a capable workforce, of course, but also boils down to a few simple, crucial factors.

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For both existing and new infrastructure, rates of deterioration, repair and borrowing need to be aligned. Life-cycle costing -- taking into account not only the expense of building infrastructure but also the costs of operating and maintaining it -- needs to become the de facto mode. Immediate savings due to cutting corners shouldn't excuse operating or repair costs that spiral out of control in later years.

An example from Georgia illustrates the benefits of life-cycle costing. A life-cycle cost analysis allowed the state's department of transportation to undertake Fast Forward, a six-year, $14.4 billion program to relieve long-term traffic congestion, enhance economic development and accelerate 18 years of projects to be completed in six.

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