Serbia Railways Asset Management Plan Using Life Cycle Costs

Public Disclosure Authorized
Report No: AUS0001540
Serbia Railways Asset Management Plan
Using Life-Cycle Costs

May 9, 2020
Transport
.
Document of the World Bank

.
© 2020 The World Bank

1818 H Street NW, Washington DC 20433
Telephone: 202-473-1000; Internet: www.worldbank.org
Some rights reserved.
This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect
the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the
data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment
on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.
Rights and Permissions
The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced,
in whole or in part, for noncommercial purposes as long as full attribution to this work is given.
Attribution—Please cite the work as follows: “World Bank. 2020. Serbia Railways Asset Management Plan Using Life-Cycle Costs. © World Bank.”
All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H
Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org.

Table of Contents
Acronyms and Abbreviations ..............................................................................................................................4
Executive Summary ............................................................................................................................................5
MAIN RECOMMENDATIONS .......................................................................................................................................... 6
1. Introduction .....................................................................................................................................................9
2. Improving the Management of Serbia’s Rail Infrastructure.......................................................................... 11
RAIL ASSET MANAGEMENT AND ITS IMPORTANCE FOR A SUSTAINABLE AND SAFE RAILWAY ..................................................... 11
THE IMPORTANCE OF DATA COLLECTION ....................................................................................................................... 13
OVERVIEW OF THE CURRENT SITUATION IN IZS ............................................................................................................... 14
SUMMARY OF ONGOING INITIATIVES ............................................................................................................................ 16
DELIVERY OF IZS’S MAINTENANCE OBLIGATION .............................................................................................................. 20
CHALLENGES IN THE CURRENT PROCESS UNDERLYING TRACK MAINTENANCE........................................................................ 22
3. The Life-Cycle Cost Model ........................................................................................................................... 25
SYSTEM ADEQUACY ................................................................................................................................................... 25
OPTIONS FOR ASSESSING A TRACK’S LIFE CYCLE .............................................................................................................. 26
THE WORK CYCLES OF STANDARD ELEMENTS ................................................................................................................. 28
ECONOMICS AND COST DATA ...................................................................................................................................... 34
4. Implementation of the Life-Cycle Cost Method in IZS................................................................................. 36
INTRODUCTION OF THE METHOD AND PREPARATORY WORK ............................................................................................. 36
ADAPTING THE LCC METHOD TO A SUBSET OF THE SERBIAN RAIL NETWORK ........................................................................ 37
SCALING UP THE LCC METHOD TO THE ENTIRE SERBIAN RAILWAY NETWORK ....................................................................... 38
5. Recommended Next Steps ............................................................................................................................ 48
RECOMMENDATIONS FOR MCTI AND IZS ...................................................................................................................... 48
RECOMMENDATIONS FOR THE WORLD BANK ................................................................................................................. 49
Appendix A. Screenshots of the Serbia Railways LCC Computer Program ...................................................... 51
Appendix B. Work Cycles ................................................................................................................................. 56
LIST OF FIGURES
Figure 1. Key Elements of the Rail Asset Management Process ....................................................................... 12

Figure 2. Balancing Short- and Long-Term Priorities in Asset Management .................................................. 13
Figure 3. Quality and Quantity of Data Required for Focused Management................................................... 14
Figure 4. Organizational Structure of IZS ......................................................................................................... 15
Figure 5. Structure of the Integrated Railway Database ................................................................................... 18
Figure 6. Planning and Execution of Railway Maintenance in IZS .................................................................. 20
Figure 7. Track Components ............................................................................................................................ 27
Figure 8. Data for Work Cycles I ....................................................................................................................... 29
Figure 9. Data for Work Cycles I ....................................................................................................................... 30
Figure 10. Average Work Cycles ........................................................................................................................ 31
Figure 11. Averaging Service Life across Different Sections ............................................................................. 33
Figure 12. Standard Element I .......................................................................................................................... 42

Figure B.1 Data for Work Cycles I .................................................................................................................... 56
Figure B.2 Data for Work Cycles I .................................................................................................................... 57
Figure B.3 Averaging Work Cycles ................................................................................................................... 58
LIST OF TABLES
Table 1. Mapping of Ongoing Initiatives and IZS Obligations ........................................................................ 17

Table 2. Select Cost Categories in the IZS Accounting System and Their Use in Budgeting .......................... 23
Table 3. An Assessment of Passenger Traffic on Serbian Railways .................................................................. 25
Table 4. An Assessment of Freight Volumes on Serbian Railways ................................................................... 26
Table 5. Traffic Load Categories ...................................................................................................................... 39
Table 6. Rail Line Radius .................................................................................................................................. 39
Table 7. Subsoil Quality .................................................................................................................................... 39
Table 8. Sleeper Types ...................................................................................................................................... 40
Table 9. Rail Types ........................................................................................................................................... 40
Table 10. Parameter Sets Identified for Serbia .................................................................................................. 41
Table 11. Maintenance and Renewal Costs ....................................................................................................... 43

ACKNOWLEDGMENTS
This study has been funded by a generous grant from the Mobility and Logistics MDTF.
The report was prepared by a World Bank team led by Victor Aragones, Senior Transport
Specialist, Task Team Leader; Rodrigo Archondo, Senior Engineer; Svetlana Vukanovic, Senior
Transport Specialist; and Helena Goetsch, Junior Professional Officer. Desanka Stanic (Program
Assistant), Andoriah Indah Purwaningtyas (Program Assistant), and Graciela Tejeda (Program
Assistant) provided support to the team throughout the study.
The report benefited from the comments of peer reviewers Simon Ellis (Program Lead) and
Wenyu Jia (Senior Urban Transport Specialist). The team is grateful for the guidance provided by
Stephen Ndegwa (Country Manager), Karla Gonzalez Carvajal (Practice Manager for Europe), Juan
Gaviria (Former Practice Manager), and Baher El-Hifnawy (Former Lead Economist). The World
Bank would like to recognize Peter Veit, Branko Bajatovic, and Stefan Marschnig for their
dedication and effort during the implementation of the life-cycle costs method and its
documentation outlined in this report.
The World Bank team would like to formally thank the Ministry of Construction, Transport, and
Infrastructure (MCTI), Infrastruktura Železnice Srbije (IZS), Srbija Voz, and Srbija Cargo for
fruitful discussions, consultations, ideas, and access to data and information.

Acronyms and Abbreviations
CAPEX capital expenditure

CWR continuous welded rail
IID integrated infrastructure database
IRD Integrated Railways Database
IZS Infrastruktura Železnice Srbije (Serbian Railways Infrastructure)
km kilometer
LCC life-cycle cost
m meter
MCTI Ministry of Construction, Transport, and Infrastructure
NPV net present value
ÖBB Österreichische Bundesbahnen (Austrian Federal Railways)
OPEX operating expenditure
StE Standard Elements

Executive Summary
Understanding the life-cycle cost (LCC) of rail infrastructure is key to managing assets in an
efficient manner. Similar to financial sustainability, efforts toward infrastructure sustainability must
account for the full costs of constructing, operating, maintaining, and renewing infrastructure.
Knowing these costs enables infrastructure managers to choose how to optimize investments
under existing conditions.
The introduction of the LCC model, through the World Bank technical assistance (TA) described
in this report, created the capacity within Serbian Railways Infrastructure (Infrastruktura Železnice
Srbije, IZS) to account for the costs of rail tracks through their life cycle. Importantly, the model
was adjusted to local conditions by IZS staff, who now will be able to continue using this tool to
augment the organization’s capacity in rail asset management (RAM).
In general, RAM is a practice of systematically managing rail assets through their life cycle. This
approach to managing rail assets provides more value for the money being invested, whether in
capital or operations and maintenance. By managing assets’ performance, risks, and costs,
practitioners can ensure a greater degree of safety in a more cost-effective manner. This translates
into higher levels of service for rail customers.
Ideally, RAM encompasses all components of a rail system, such as tracks, structures, equipment,
signaling, and others. In the process, analysts try to identify the most cost-effective way of
constructing, maintaining, and renewing infrastructure over its entire life cycle. For example, when
looking at track, analysts will gather information about the type of ballast (limestone or granite),
crossties (wooden or concrete), rails (49E1-R260-CWR or 49E1-R260-jointed), and welding
(alumino-thermic or flash butt). An infrastructure manager will be able to estimate the track
needed, based on the expected service life and under specific operating conditions, when different
components are used. The same logic applies to maintenance practices. A global wealth of
knowledge about rail maintenance can be utilized to determine the frequency of maintenance
activities needed to ensure customers receive a particular level of service. Some maintenance
activities, such as grinding or tamping, can enhance safety and maintain service life if performed
with the ideal frequency.
RAM also enables technical staff and decision-makers to learn about the consequences of deferring
maintenance, including shortened service life. Beyond the loss of service life, a RAM system will
estimate full costs not only to the infrastructure manager, but also to society as a whole (including
rail customers and the general public).
The LCC model offers a simple and low-cost way to estimate the life cycles of track infrastructure
and its associated costs. This is important, as its concepts and principles constitute the foundation
for the establishment of more advanced RAM systems. The TA that is the subject of this report
introduced this capacity in IZS, which paves the way for further advances in RAM that, ideally, will
move beyond track infrastructure (i.e., the focus of this TA) to cover all rail system components.
The introduction of RAM in Serbia is important at this time. Even as the sector is being revitalized,
existing railway assets have fallen into a state of disrepair due to inadequate maintenance over the
past 30 years. The absence of RAM allowed scarce maintenance budgets to be misallocated and
used in a nonstrategic manner to address only immediate emergency needs. This created a vicious

cycle in which assets deteriorated to the point where they have to be reconstructed. If a RAM
system had been in place, overall costs could have been reduced through timely maintenance and,
most likely, a larger share of the network would be in a better state of repair today.
This TA followed an important event in Serbia’s rail sector: the reform of Serbian Railways,
supported by the World Bank through two development policy operations (DPOs). Contrary to
previous practice, access to railway infrastructure is no longer “free” for operators but involves a
fee. Related to this change, IZS’s scope of responsibility now includes decision-making on a variety
of issues, including revenue, expenditure, and costs. The infrastructure manager is now directly
responsible for ensuring that the network can provide the level of service needed at the agreed
access fee. Thus, the railway network’s quality and availability are now key variables in the
performance of the infrastructure manager, which in turn brings greater attention to the need for
regular and systematic asset management processes and practices.
In the long term, the TA will bring greater transparency to the sector by empowering all entities
responsible for rail infrastructure—IZS, Serbia Cargo, Serbia Voz, and MCTI—to better estimate
the costs of track infrastructure. These costs include not only the direct costs of capital and
operations but also costs related to abstract concepts such as hindrances to customers’ productivity
and the long-term effects of deferred maintenance. Bringing these cost figures to the public sector
dialogue between the railway entities and the government will support IZS in renewing and
maintaining required assets in a fit-for-purpose condition at the minimum LCC possible.
Better railway infrastructure can be developed through more effective use of scarce financial
resources. Given that the LCC model encompasses data on both infrastructure and traffic, its
outputs may also be used to support decisions regarding rehabilitation options. For example, it may
be used to indicate which lines are best closed for intensive maintenance, and which can remain
open while undergoing ongoing, light maintenance. Hence, the model promises to help IZS better
prioritize investment in the reconstruction of key rail lines or determine whether it would be better
off closing a rail line.
This report describes the LCC model, as it is applied to managing track assets; outlines the steps
followed during the TA to transfer requisite knowledge to IZS; and recommends how IZS might
solidify the implementation of the LCC model. The report concludes with recommended next
steps, and offers guidance for other countries seeking to improve the sustainability of their rail
infrastructure.
Main Recommendations
During the preparation of the TA, IZS and the World Bank team decided that the implementation
of the LCC model is best followed by three groups of actions in support of full RAM
implementation. The actions relate to cost estimation, cost coding, and the augmentation of
management reporting. IZS is currently identifying the most efficient ways to implement each
action.
A RAM system goes beyond having an LCC model. It is important for IZS to continue its efforts
on this front by creating a system that will generate the data needed for more context-specific
analysis, continue to improve the LCC model, integrate the LCC model with costs accounting
(estimating and coding), and utilize the LCC’s model output to generate the proper RAM

documents. These documents would inform IZS’s formal decision-making process and also the
allocation of key responsibilities across the four entities in the sector. The main objective is to
equip IZS to consistently deploy the available funds in a way that generates the best returns, and in
turn, improve the management of rail assets throughout their life cycle. It is important to note that,
while the LCC model is an important step forward, IZS still needs to work toward the full
implementation of a RAM system. Maintenance decisions are still being made based on the
immediate need for repairs, not long-term plans. Observations of the IZS maintenance value chain
yielded four key improvement objectives:
• Equip IZS to analyze its own efficiency in the delivery of service life, and in cost recovery. This TA has
created the capacity within IZS to analyze service life and cost recovery, but more can be
done to ensure that the knowledge in the working group is institutionalized and becomes
part of the organization.
• Prepare output-driven maintenance plans. It is key for the LCC method, database, and software to
be used to generate output-driven maintenance plans. Such plans can then be used in
budget deliberations with the Government of Serbia to determine the best way forward in
securing a sustainable level of service across the network.
• Identify the costs of individual maintenance efforts. Current cost accounting does not have the
capability to identify where maintenance funds are being spent in the network. This would
enable mapping of the maintenance investment in the rail network and more accurate data
for use in the LCC method. This in turn would provide better information regarding the
remaining service life in the network and areas of the rail system that require attention.
Furthermore, this would enable decision-makers to know if resources are being spent in the
segments of the network that have higher levels of traffic.
• Strengthen management reporting in support of line-by-line decision-making. This would increase

transparency and strengthen the dialogue between all stakeholders in the railway sector.
Detailed information about the management of assets would enable IZS to focus
negotiations and conversation about the state of rail infrastructure to the specific areas of
concern and to highlight where the focus should be directed.
• Strengthen the integration of RAM tools with the decision-making process. This is to ensure that
outputs and documents being produced by the LCC model and the other components of
the emerging RAM system are used in the planning process for the maintenance and
renewal of infrastructure. Furthermore, the outputs of the RAM system should also be
integrated in overall management decisions within IZS and in its dealings with MCTI,
Serbia Cargo, and Serbia Voz.
The proposed implementation plan is structured around four specific groups of tasks:
1) Appoint and empower the IZS working group to manage the implementation scope;
2) Implement a robust cost estimating approach;
3) Enhance cost coding to enable maintenance project identifications;
4) Augment management reporting.

In terms of improving the LCC method, IZS and the rail sector in general should establish a RAM
system in which all decisions are taken focusing on a sustainable, future-oriented railway system.
Specific next steps for the LCC model are:
• The set of standard elements to be used in the Standard Elements (StE) approach needs to
be enlarged so long as standard elements cover 80 to 90 percent of the network.
• Track costs must be delivered and documented on a uniform basis.
• Speed restrictions must be monetized, using an approach that is feasible given the existing
data.
If these challenges are addressed, the use of StE approach can then support:
• The identification of necessary maintenance and renewal budgets in order to guarantee

sustainable railway infrastructure ready to cope with future loadings.
• The identification of components to be used for different parts and lines in the network.
• A decision on a reinvestment project if local data are added.
• The development of a track asset management database system that integrates the LLC
model, IRT, and GIS.
The IZS working group, which started its work in mid-2018, is by now composed of informed and
experienced members who have already delivered first results. This group is well positioned to
oversee the implementation of the next steps with proper support from the leadership of the
company and decision-makers in the Government of Serbia.
Furthermore, the LCC method should be used extensively in the upcoming years as the Serbian
railway system sees a significant increase in investment in the rehabilitation of its rail lines. This will
provide an easy-to-use tool in determining investment options and estimating the LCC of new
infrastructure, avoiding potential mistakes that could affect the performance and sustainability of
the railway sector in the long term.

1. Introduction
The objective of the World Bank’s technical assistance (TA) in the asset management planning of
Serbia’s railways, using the life-cycle cost (LCC) method, is to improve the condition of key track
infrastructure in the country. The appropriate use of the LCC model would enable Serbian
Railways Infrastructure (Infrastruktura Železnice Srbije, IZS) to optimize the use of the scarce
financial resources available for maintaining track infrastructure. The LCC model offers a simple
and inexpensive way to estimate the longevity and condition of track infrastructure and the costs
associated with its renewal and maintenance. This is important, as the model’s concepts and
principles form the foundation for the establishment of a more advanced rail asset management
(RAM) system. This TA introduces this capacity in IZS, with a focus on track infrastructure, and
thus paves the way for further advances in RAM, which ideally will cover all rail system
components (structures, signaling, rolling stock, and others).
This is important for Serbia at the moment; many railway assets have fallen into a state of disrepair
due to inappropriate maintenance, and are in suboptimal condition. The limited funds available for
maintenance are often allocated in a nonstrategic manner to address emergency needs. This creates
a vicious cycle in which assets deteriorate to the point where they have to be rehabilitated.
Meanwhile, overall costs could have been reduced through timely maintenance.
This TA followed a World Bank policy note, prepared in 2015, that recommended
commercialization and efficiency improvements in Serbia’s railways. The implementation of the
LCC method complements these recommendations by providing specific guidance on improving
the cost-effectiveness of Serbia’s rail infrastructure.
Another important event in Serbia’s rail sector was the reform of Serbian Railways, supported by
the World Bank through two development policy operations (DPOs). Serbian Railways, once a
vertically integrated company, was unbundled into three separate businesses, that today handle
infrastructure (IZS), passenger transport (Serbia Voz), and cargo transport (Serbia Cargo).1 This
new structure generated the need for a variety of services and transactions to be performed
between the three rail businesses. For example, IZS transitioned from being a department of
Serbian Railways to being a corporate entity of its own. It is now tasked with maintaining and
developing railway infrastructure and providing traffic dispatching and coordination services.
Contrary to the previous practice, access to railway infrastructure is no longer “free” for operators
but involves a fee. Related to this change, IZS’s scope of responsibility now includes decision-
making on a variety of issues, including revenue, expenditure, and costs. These financial outcomes
have to be reflected in IZS’s own profit and loss statement, among other financial statements.
These changes imply that the infrastructure manager is now directly responsible for ensuring that
the network can provide the level of service needed at the agreed access fee.
A key feature of the new railway setup is the permanent interface between the operators and the
infrastructure manager. The infrastructure manager allocates a path, which is purchased by the
operator. Thus, the infrastructure manager has an underlying obligation to provide service to the
1 A fourth company was created to liquidate unneeded assets.

operator. The railway network’s quality and availability are now key variables in the performance of
the infrastructure manager, and this, in turn, brings greater attention to the need for regular and
systematic asset management processes and practices.
This TA enabled staff from IZS to apply the LCC model to the Serbian rail network. The LCC
model has been successfully used by rail infrastructure managers in Austria and Switzerland to help
identify the most economical and sustainable track maintenance options. The Standard Elements
(StE) approach within the LCC model was utilized, given the data available in Serbia. The StE
approach draws on a pool of generalized data from a variety of countries around the world. The
Technical University (TU) in Graz, Austria, maintains a database of possible combinations of
components and their expected behaviors. This allows analysts to identify the expected life cycle of
comparable combinations in real life. Using this database, alongside data on Serbia’s entire network
(rather than individual lines), IZS was able to implement the LCC method.
The model outputs will support IZS in developing an asset management process to renew and
maintain required assets in a fit-for-purpose condition at the minimum LCC possible. This will
enable the development of better railway infrastructure through more effective use of scarce
financial resources. Given that the model encompasses data on both infrastructure and traffic, its
outputs may also be used to support decisions regarding rehabilitation options. For example, it may
be used to indicate which lines are best closed for intensive maintenance, and which can remain
open while undergoing ongoing, light maintenance. Hence, the model promises to help IZS better
prioritize investment in the reconstruction of key rail lines or determine whether IZS would be
better off by closing a rail line.
This report describes the LCC model, as it is applied to managing track assets; outlines the steps
followed during the TA to transfer requisite knowledge to IZS; and recommends how IZS might
solidify the implementation of the LCC model. The report concludes with recommended next
steps, and offers guidance for other countries seeking to improve the sustainability of their rail
infrastructure.

2. Improving the Management of Serbia’s Rail Infrastructure
Rail Asset Management and Its Importance for a Sustainable and Safe
Railway
In general, rail asset management (RAM) is a practice of systematically managing assets through
their life cycle—that is, procuring, operating, inspecting, maintaining, rehabilitating, and replacing
them.2 This approach to managing rail assets provides greater value for the money spent over an
asset’s lifetime by managing performance, risks, and costs. In other words, when properly
managed, rail assets can support the functioning of a safe, cost-effective, and reliable rail
transportation system on a life-cycle basis.
A RAM system comprises all the methods, procedures, and tools used to optimize costs,
performance, and risks across all rail infrastructure and rolling stock. This means that track,
structures, and equipment—among the other components of a rail system—must be considered in
the RAM context. Furthermore, a complete RAM system will take into account the full costs
related to each stage in an asset’s life cycle, and consider how each decision affects the service life
of the asset and its cost. This supports their optimization—that is, the most cost-effective way of
constructing, maintaining, and renewing infrastructure over their life cycle. The detailed data
supporting a RAM system will also enable technical staff and decision-makers to learn about the
consequences of each possible decision. In the process of looking at these, analysts must not only
take into account the costs to the infrastructure manager but also to society as a whole (including
rail customers and the general public).
In sum, RAM allows an infrastructure manager to find the right balance of initial investment and
maintenance, of a preferred level of service and an expected service life. These factors are not fixed
but depend on the operations and characteristics of a railway system. As such, technical staff and
management must be able to use RAM tools in a contextual manner to make the appropriate
decisions.
As noted in the introduction to this report, Serbia’s rail sector has started a process of reform and
been reorganized into vertically separated companies. The implementation of a RAM system in
Serbia is needed at this critical juncture. The railway system is expected to see a significant level of
investment in the coming years, and needs to prepare so it can manage its assets. Careful planning
will ensure that this investment provides the expected level of service for the expected number of
years at the expected cost. Otherwise, the risk is to lose the initial investment through improper
maintenance, prompting a gradual deterioration in the level of service and eventually resulting in a
lost opportunity to use new infrastructure to attract passengers and freight to the railway system.
Reflecting the importance of institutional attributes, this section reviews the current organizational
setup of IZS and its obligations as an infrastructure manager.
2Federal Transit Administration, “Final Rule Transit Asset Management,” Federal Register Vol. 81, No. 143, July 26,
2016, https://www.govinfo.gov/content/pkg/FR-2016-07-26/pdf/2016-16883.pdf.

Figure 1. Key Elements of the Rail Asset Management Process
Effective asset management depends on in-depth knowledge of the assets in question, an

understanding of the relationship between inputs and outputs, and carefully calibrated objectives
for service delivery. Thus, sound data collection and an organized database are needed in order to
ensure IZS will have the proper information on its assets. Ideally, the data collected will include the
quantity and location of assets, their type and technical specifications, age and condition, usage and
performance, and cost and maintenance history. Regarding the relationship of inputs to outputs,
the infrastructure manager must understand the interconnections among infrastructure use, costs,
and performance. These typically involve trade-offs such as axle load and asset degradation, line
speed and line capacity, engineering access and costs, or maintenance and renewal. At this level, it
is key for the infrastructure manager to understand the impact of each of these factors on the LCC
of the infrastructure, the service needs, and other constraints. At the end of the day, both
knowledge and input/output relationships must result in the delivery of a desired service level
across the network. Delivery must be balanced according to short- and long-term priorities,
engineering constraints, and commercial obligations, and based on credible project management.
The LCC model can help IZS uncover the input-output relationships related to infrastructure. As
noted later in this report, the LCC model includes a decision-making tree that may be used to
determine if a rail line has enough traffic to support its renewal or maintenance, or if closure is the
preferred options. It also accounts for all costs (maintenance, renewal, depreciation, user costs),
which provides a full picture about the real effects of the decisions made.
In terms of delivery, this report provides a set of recommendations for an organizational structure
that will support IZS in producing documentation utilizing the information generated by the LCC
method to frame IZS’s obligations to the train operators and the government. RAM documents
provide a clear picture about the need for maintenance, renewals, and new investment. They also
document the costs imposed on operators and the consequences of maintenance and renewal
decisions. This information will be useful for internal planning as well. LCC model outputs will

help technical experts determine the best components to use and the ideal frequency of
maintenance activities.
Figure 2. Balancing Short- and Long-Term Priorities in Asset Management
• Infrastructure Manager A
has maintained its assets
at a steady state while
managing periodic budget
fluctuations.
• Infrastructure Manager A
continues to operate
within a “high-quality
zone.”
• Infrastructure Manager B
has let asset quality
degrade and is now
operating within a “low-
quality zone.”
• Infrastructure Manager
B’s operating costs are
now much greater than
before and greater than
Infrastructure Manager
A’s.
• The costs and resources
required to enable
Infrastructure Manager B
to move back to the high-
quality zone are
disproportionately high.
The Importance of Data Collection

Knowing what assets are owned and their condition is key for infrastructure managers to be able to
manage assets appropriately. This knowledge, at a minimum, requires recording the specifications,
locations, conditions, and costs of assets. These data must be stored and be available to ensure that
technical staff and management can use them.
An asset register is a fundamental tool to fulfill this need, and should contain information relating
to assets’ quantity and locations, specifications, conditions (including fault data), usage and
performance, and date of installation (including subsequent maintenance interventions). These data
may then be disaggregated as needed to inform decisions and set priorities. Importantly, the
updating of an asset register is an ongoing and continuous task.
It is important that the database include accurate information on assets. This is essential for a
targeted asset management strategy. There are various techniques used to capture such
information, including visual inspection by track experts, ultrasonic testing, ground probing radar,
video, and the use of recording car data. Automated vehicles may be used for data collection and
inspections; key measurements are often collected by instruments attended to by one or more
operators. There are many types of such vehicles, ranging from self-propelled to towed or hi-rail

vehicles.3 Recording cars assess track geometry and other criteria and collect large amounts of data
that can be stored for future use. Furthermore, sensors can be coupled on to rolling stock to
inspect track where that equipment operates. This can increase the number of kilometers inspected
on a yearly basis and the amount of data collected in an exponential manner. Among the new
autonomous track inspection technologies that have been developed in recent years, revenue
service trains equipped with data collection equipment employ wireless communications to provide
inspection data with dramatically increased frequency and at a reduced cost.4
These and other new practices are providing infrastructure managers with the data needed to gain
accurate knowledge of the state of repair in a network, increasing their capacity to support
decision-makers. The outputs of decision support tools are only as good as the quality of the asset
information they rely on. Prioritized analysis based on good-quality data can focus management
attention on the issues critical to achieving overall business objectives. Such data need not be
exhaustive. A limited range of criteria can provide most of the information required to make key
decisions. Thus, the infrastructure manager needs to measure those data required to make key
decisions such as whether to undertake project A or project B (or neither). Based on close analysis,
the infrastructure manager can then assess the benefits of accelerating or deferring work at certain
locations of the network.
Figure 3. Quality and Quantity of Data Required for Focused Management
Overview of the Current Situation in IZS

This section is the result of diagnostic work that involved a documentation review and meetings
with IZS experts focused on infrastructure maintenance, planning and analysis, accounting, and
information technology (IT). The main purpose was to identify the steps required for IZS to
sustainably embed the LCC method within its organization. As part of a series of workshops and
discussions with IZS functional experts, it became apparent that the budgeting of maintenance
3Carr, Gary A., Ali Tajaddini, and Boris Nejikovsky, “Autonomous Track Inspection Systems—Today and
Tomorrow,” AREMA Annual Conference and Exposition Proceedings, Chicago, IL, September 20–23, 2009.
4 Ibid

work did not include all cost items, and the in-house method needed to be strengthened in support
of the LCC model (and of IZS’s overall accounting).
As mentioned in the introduction, IZS has evolved significantly since 2015, from being a
department in charge of infrastructure in the former vertically integrated national railway company
to a corporate entity of its own. As such, the organization is set up on a functional basis, around its
main duty, infrastructure management, and shared groups of service-related tasks. Figure 4 shows
the current organizational structure of IZS. The board of directors is under the shareholder
assembly. The general manager is in charge of the day-to-day management of the company and
there are five divisions: (i) traffic management; (ii) infrastructure management; (iii) financial,
accounting, and procurement; (iv) investments; and (v) human resources/shared resources.
Figure 4. Organizational Structure of IZS
Note: HR = human resources; HS = high speed; IT = information technology.
Main Institutional Obligations

IZS is responsible for the preparation and delivery of the corporate business plan, which includes
maintenance, investment, and procurement plans.5 Maintenance plans are generally funded from
IZS’s infrastructure contract with the Ministry of Construction, Transport, and Infrastructure
(MCTI) and executed using internal resources. The responsibility for their preparation, execution,
and monitoring is allocated to the manager for infrastructure maintenance. Investment plans are
almost always funded by international financial institutions and/or through bilateral agreements.
Their preparation follows a different road map, as driven by the specific funding source. The
related responsibility for the preparation, execution, and monitoring of investment plans is
allocated to sectors for development and investment. Given that this chapter focuses on the
5 As a public utility in Serbia, IZS is required to follow a government-prescribed format for its business plan.

preparation and implementation of maintenance work, investment plans are excluded from the
narrative below.
Among its key obligations to railway operators, IZS is responsible for the preparation and
publishing of a network statement and the delivery of train paths. Delivering this network
statement is the responsibility of the Section for Infrastructure Access, and the provision of train
paths to the operators is the responsibility of IZS Traffic Management.
The network statement is published on a yearly basis and provides information about the rail
network, traffic operations, terms and conditions for access, and the fee scheme applied to
infrastructure access.6 An important function of the network statement is to provide information
about principles and criteria for the allocation of rail capacity. IZS uses the network statement on a
day-to-day basis to grant access, and to charge fees for this access to rail undertakings (train
operators). The network statement informs and sets the principles and criteria for capacity
allocation by providing general information about the system from a legal, organizational, and
policy standpoint, laying out the conditions for access to the network (safety, permits, process to
obtain access, operating rules), an overview of the technical characteristics of the network and
available services, criteria for the allocation of capacity, and charges for access.
As can be seen, the state of repair has a direct impact on most of the contents of the network
statement as the level of service on the tracks determines how IZS can fulfill its obligations as set
out in the network statement. For this reason, the establishment and use of a RAM system is highly
relevant for IZS’s publication and use of a network statement. As the network statements allows
IZS to clearly identify its obligations, priorities, and areas of focus, a RAM can be used to allocate
available resources toward the fulfillment of those obligations. In turn, the use of a RAM system
will likely shape future network statements by ensuring costs are closely reflected in the allocation
and use of the network, and by ensuring the costs of disruption to operators (i.e., hindrances) from
track disrepair are also reflected both in the network statement and in the determination of track
access charges.
IZS Managerial Obligations
In order to ensure the long-term sustainability of the company and railway network, IZS needs to
optimize the use of infrastructure across its life cycle. IZS must also be able to demonstrate the
informed management of railway infrastructure assets to the MCTI and operators by (i) analyzing
its own efficiency in the support of assets’ service life and (ii) acknowledging the degree of cost
recovery in its operations. These two are the key managerial obligations assumed by IZS.
Summary of Ongoing Initiatives

In an attempt to enhance the management of its business through improved cost monitoring,
reporting, and control, IZS has four key improvement initiatives currently underway:
• Development of an integrated infrastructure database (“IID”);7

• Introduction of the LCC model;8
6 IZS network statement 2019.

7 Supported by the World Bank through this technical assistance.
8 Supported by the World Bank through this technical assistance.

• Introduction of SAP; and
• Introduction of an in-house “cost recording” application.
Collectively, the four initiatives provide a strong platform for IZS to strengthen delivery of the
scope of its infrastructure contract9 with the MCTI through (i) delivery of its business plan and
network statement (“institutional obligations”) and (ii) improved efficiency of service life provision
for its assets and cost recovery of its operations (“managerial obligations”). When completed, the
four initiatives will further improve IZS’s ability to deliver its obligations.
Table 1. Mapping of Ongoing Initiatives and IZS Obligations
Obligation
Institutional Managerial Managerial Institutional
Network Efficient service Cost recovery of
Initiative Maintenance Plan
Statement life provision operations
Asset Register
Integrated
Trafic Data
Railway
Cost Data
Database
Revenue Data
Introduction of Standard Elements
Introduction of SAP
Introduction of "Timesheet"
Primary relevance in addressing the obligation
Secondary relevance in addressing the obligation
Note: IZS = Serbian Railways Infrastructure (Infrastruktura Železnice Srbije).
Development of an Integrated Railway Database

This activity allowed the World Bank and IZS to determine the various data required to
demonstrate informed management of rail assets. Based on this technical work, it has been
determined that IZS needs to consolidate data on assets’ location and condition, works undertaken
and projected for the future, historic traffic loads, and projections for the future. IZS currently has
this information within its organization but the problem is that it is scattered across the company
along with related responsibilities for data collection, maintenance, and upgrade. This makes it
difficult for IZS to readily assemble the necessary information for decision-makers in the face of
the numerous operational and strategic decisions that they are required to make as infrastructure
managers—such as how and where to spend available funding.
Given the need to assemble a database for the implementation of the LCC method, the World
Bank commenced work on its development. The agreement was for the World Bank to transfer the
database to IZS for its permanent management. However, since the data were to be used for
decisions affecting the rail sector at large (i.e., MCTI, infrastructure manager, operators, future
regulators, and the public at large), it was recommended that it be owned by the MCTI and
managed by IZS.10 The database includes four separate components:
• Asset register. This element of the database is structured to include details required for annex
6 of the network statement, allowing IZS to produce annex 6 as an immediate deliverable
9 Three key elements of IZS’s scope under the contract include (i) infrastructure maintenance and network upgrades;
(ii) traffic management, security, and safety of infrastructure; and (iii) project preparation in support of network
development.
10 On December 2018, the database was transferred to IZS for further development.

once the annual compilation of the database is complete. In addition, the asset register
includes data on the qualitative assessment of individual line sections, information on asset
conditions recorded by diagnostic trains, a list of historic works undertaken, and the
current year’s plan. The completed elements of the asset register include the “fixed data”
required for annex 6 and the qualitative assessment of assets along the individual sections
of the main lines.11
• Traffic data. This section of the database is intended to capture the freight and passenger
traffic loads on the network during the preceding five-year period as well as the current
year’s traffic projections.12 Data collection for this section was undertaken by IZS, and the
World Bank populated the database.
• Cost data. This section of the database is intended to capture the cost of operations and
maintenance across individual line sections during the previous five-year period, as
recorded by the in-house accounting system, as well as the current year’s cost projections.
Population of this section of the database will be undertaken by IZS.
• Revenue data. This component of the database is intended to capture the revenue from
infrastructure access charges earned by IZS per individual line section from passenger and
freight trains during the previous five-year period as well as the current year’s revenue
projections. The component will also capture historic revenue earned from infrastructure
performance contracts and the current-year contract revenue. This information is sourced
from the accounting system. Population of this section will be undertaken by IZS.
Figure 5. Structure of the Integrated Railway Database

Block 4: Revenue data
A/C passenger A/C passenger A/C freight A/C freight Perf. contract (5 Perf. contract
(5 years) (current year) (5 years) (current year) years) (current year)
Data source: Data source: Data source: Data source: Data source: Data source:
Main Lines
SRIM SRIM SRIM SRIM SRIM SRIM

Block 3: Cost data (per line section or category of works
(civils, electrical, communication, signalling, power)
Operations Operations Maintenance Maintenance
(last 5 years) (current year) (last 5 years) (current year)
Data source: Data source: Data source: Data source:
Main Lines
Regional Lines
SRIM SRIM
Data source: Data source:
SRIM Data source:SRIM Data source: Data source: Data source:
SRIM Block 2: Traffic SRIMdata SRIM SRIM SRIM SRIM
(UIC categories of data)
Passenger trains Passenger trains Freight trains (last Freight trains
(last 5 years) (current year) 5 years) (current year)
Data source: Data source: Data source: Data source:
Main Lines
SRIM/Voz Data source: SRIM/Voz Data source:

Regional Lines
SRIM/Cargo Data source:

SRIM/CargoData source:
SRIM Data source:
SRIM Data source:
SRIM Data source:SRIM Data source: Data source: Data source:
Block 1: Asset register – geometry, works undertaken andSRIM
condition
Local Lines
SRIM SRIM SRIM SRIM SRIM

Qualitative Historic works Current year
“Fixed” data assessment Measurement undertaken plan
Data source: Data source: Data source: Data source: Data source:
Main Lines
Annex 6 SEETO forms Diagnostic DataSEETO SRIM

source:forms Data source:
Regional Lines
(Network Data source: Data source:

train readings
SRIM/Voz Data source: and SRIM
SRIM/Voz Data source:
Statement) SRIM/Cargo Data source:
SRIM/CargoData source:
(TBD how to (where
Local Lines
SRIM SRIM SRIM SRIM

code readings required)
for the table)
Regional Lines
Annex 6 SRIM Diagnostic SRIM SRIM
(Network Data source: Data source:
train readings Data source: Data source:
Local Lines
Statement) SRIM/Voz(TBD how toSRIM/Voz SRIM/Cargo SRIM/Cargo

code readings
for the table)
Local Lines
Annex 6 SRIM Diagnostic SRIM SRIM

(Network train readings
Statement) (TBD how to
code readings
for the table)
Note: SEETO = South East Europe Transport Observatory; SRIM = Serbia Railways Infrastructure Manager; TBD =
to be decided.
11 As of December 2018.
12 For simplicity, the traffic load information may be recorded, stored, and updated elsewhere from the database.

As noted above, each component of the database is directly relevant to the delivery of IZS
obligations:
• The structure of the asset register enables production of annex 6 of the network statement
as an immediate deliverable. The asset register also acts as a data repository for an analysis
of service life and the development of maintenance plans.
• The components devoted to data on traffic, costs, and revenue are direct inputs for the
maintenance plan, and also an analysis of service life and the cost recovery of IZS
operations.
Introduction of the LCC Model’s Standard Elements Approach

The Standard Elements (StE) approach was introduced to assist in identifying the most cost-
efficient option for IZS to optimize the service life of its assets (line sections). The StE approach is
also a direct input for the maintenance plan. This initiative is a major part of the technical
assistance and is covered in detail in chapter 3 of this report.
Introduction of SAP
Earlier in 2018, IZS appointed an external supplier13 to implement SAP modules for financial
accounting (FI module), controlling (CO module), human resources (HR module), payroll (PY
module), basis components (BC module), and advance business application programming (ABAP
module). The introduction of SAP, through the recording of all costs, is a direct input for the
maintenance plan and an analysis of service life and, through recording of all revenues, a direct
input into the analysis of the cost-recovery level of IZS operations.
Introduction of Cost Recording Application
IZS developed an in-house application to track and monitor the deployment of resources and their
associated costs. The application allows the recording of resource usage per location. Such a tool is
quite useful for collecting data relevant to the LCC method as it specifies the exact line segment
being subject to maintenance. The application was developed separately from SAP and has been
piloted across the organization from Q4 2018, and was expected to be used throughout the
organization by the end of 2020. The introduction of this application, through the recording of all
costs, is a direct input for the maintenance plan, an analysis of service life, and the degree of cost-
recovery in IZS operations.
The cost recording application provides good-quality data that can be geolocated to a particular rail
segment. Being able to connect these data to the overall system is very valuable, given the difficulty
of obtaining cost data. Additionally, the geolocation of expense data can be coupled in the future
with the wear-and-tear of track infrastructure. Automated track inspection data could be coupled
to strengthen cost estimates and allocate these costs to trains using the rail line. This opens an
opportunity to gradually improve the network statement by improving its description of existing
infrastructure and the user charges related to each segment.
13 S&T Serbia d.o.o.

Delivery of IZS’s Maintenance Obligation
This section describes how IZS currently carries out its maintenance obligation. A diagnostic
review of IZS’s procedures, including through discussions with maintenance, planning, accounting,
and IT experts was completed with a focus on the maintenance value chain—the preparation of
scope, budgeting, execution and cost monitoring, and completion and reporting—in order to
identify the specific challenges to the budgeting and monitoring of maintenance costs.
Figure 6. Planning and Execution of Railway Maintenance in IZS
1
Definition
of Scope
4 2
Completion
and Budgeting
Reporting
3
Execution
and Cost
Monitoring
Note: IZS = Serbian Railways Infrastructure (Infrastruktura Železnice Srbije).
Observations made for each step in the maintenance value chain are presented in terms of where
the step fits in the overall picture, what entity is responsible for it, and how it interfaces with
ongoing initiatives.
It is important to note that the current IZS method for planning maintenance is based on track
conditions. Thus, it is more reactive than systematic. In many other rail systems around the world,
maintenance is prioritized and planned with a longer-term horizon based on the life years of the
track and the volume of traffic that moves over it.
Definition of Scope
On an annual basis, the Infrastructure Maintenance Department (Center for Infrastructure Works
Supervision) assesses the conditions of all assets in the network and determines the scope of
necessary works based on the conditions observed in the field. Considering the level of resources
required, a decision is made whether the work can be undertaken using in-house resources under
the maintenance budget category (and thus becoming an operating expenditure, OPEX) or needs
to be externally funded and be treated as an investment project (such as a renewal or upgrade
requiring capital expenditure, CAPEX).
Following site reports from the infrastructure supervision teams, IZS’s civil works and electrical
works teams propose the scope required to bring the asset quality in line with the original
specification. This is executed in a bottom-up fashion and shown per individual line. As a result,
the proposed maintenance scope is broken down by functional input and is driven by affordability
rather than the expected traffic on the line. Given the significant maintenance backlog, the majority
of estimated work is reactive and considered an “urgent intervention.”

The size of the scope and resources required determine the funding source, and in turn, project
ownership. In IZS the two infrastructure maintenance sectors are responsible for work involving
OPEX.
The integrated railway database and the LCC method are of direct relevance to this step. While the
database is designed to include all relevant information on asset conditions, traffic loads, and costs,
the LCC method will enable a straightforward determination of the most efficient option—that is,
to use OPEX or CAPEX—for spending on any given section.
Budgeting
Once the scope of maintenance work is identified, the works are budgeted using the information
available from the accounting system. In costing the maintenance scope, the in-house teams use
the accounting system as a source of cost data.
At present, IZS costs are recorded in the accounting system using three codes:
• Organizational unit;
• Line (main, regional, local, other); and
• Ledger account and subaccount for the relevant asset (structure, level crossing, item of
plant, other).
Discussions with IZS’s experts have shown that a standard estimating approach in IZS takes
account of materials and related costs but typically excludes a number of direct cost items,
including the costs of (i) in-house stock (when items such as sleepers and rails are taken from
reserves or from a different location), (ii) labor (which are included as such only in the business
plan14), (iii) fuel and lubricants, and (iv) the depreciation of the plant and equipment used in
specific activities. These costs are subsequently budgeted in aggregate in the business plan, and
shown to be part of human resources, depreciation, or other costs.
Once the total maintenance budget is developed and negotiated, it is allocated to the individual
lines as part of the annual maintenance plan.
The infrastructure maintenance departments in charge of civil works and electrical works take
ownership of the budgeting task. Once the budgets are developed, they become the responsibility
of the Department for Planning and Analysis.
The introduction of SAP and the cost recording application will significantly improve the
budgeting (costing) of the identified scope through the availability of accurate cost inputs across all
cost categories.
14Review of the 2018 Maintenance Plan and Business Plan highlighted that the maintenance budget for 2018 is
estimated at SRD 1,173 million. This figure, as per the Annual Maintenance Plan, excluded indirect costs. If this were,
indeed, the total 2018 direct maintenance costs, it would imply that infrastructure maintenance, being the core
corporate activity, accounts for only 9 percent of 2018’s corporate total cost (estimated at SRD 13,487 million). In
comparison, the labor cost component for 2018 is estimated at SRD 6,005 million (44.5 percent of total cost). Using a
similarly “skewed” reporting proforma, the first infrastructure contract estimated infrastructure maintenance at a cost
of SRD 1,400 million (by excluding similar cost categories as above) and traffic management at SRD 6,100 million.

Execution and Cost Monitoring
As part of discharging its managerial and institutional obligations toward the MCTI, IZS records
and monitors all expenditure incurred throughout the year. IZS maintenance teams record the
completed works and provide inputs for the accounting system. Given that the data recorded often
cover only the materials and services purchased externally, the accounting department needs to
deploy its expert knowledge to identify and allocate the remaining direct costs across the corporate
ledger. In doing so, sectoral experts use information received from the maintenance teams,
warehouses, staff time-keeping records where available, and other information in order to compile
detailed quarterly and various other ad hoc reports for the MCTI.
The infrastructure maintenance departments (civil works and electrical works) “own” the cost data
on the execution of maintenance activities and provide inputs to the Accounting Department to
record the information in the system. Once recorded, the data are used by the Department for
Planning and Analysis. As a result, different departments share ownership of the step.
Thus, the introduction of SAP and the cost recording application will significantly improve cost
monitoring and reporting.
Completion and Reporting
Completion of the annual cycle of maintenance works and submission of deliverables required to
plan the following year—the business plan, maintenance plan, investment plan, and supporting
procurement plan for the MCTI’s approval—requires IZS to assemble a report on the actual
expenditure and costs incurred in delivering the current year’s performance. The approach and
process are exactly the same as in the case of execution and cost monitoring, outlined above,
whereby the quarterly proformas applicable to all public sector utilities in Serbia are extended from
quarterly to 12-month periods.
The infrastructure maintenance departments (civil works and electrical works) own the cost data on
maintenance execution and provide inputs for the accounting department to record the
information in the system. Once recorded, the data are used by the Department for Planning and
Analysis. As a result, different departments share ownership of the step.
Challenges in the Current Process Underlying Track Maintenance

There are three key observations around current IZS challenges in scoping, budgeting, monitoring,
and reporting its core maintenance work: (i) maintenance plans are input driven, (ii) the costs of
individual maintenance efforts are not known, and (iii) cost reporting formats mask the intended
purpose of maintenance expenditure.
Input-Driven Maintenance Plans
The manner of developing maintenance plans, by type of work, confirms that such plans are driven
by technical needs and defined by the departments in charge of civil and electrical works (see figure
4, and the organizational structure of IZS). The two plans are ultimately agreed on in an effort to
reconciliate (i) the available funds sourced from the current infrastructure contract and projected
revenue from access charges, and (ii) the initial scope and cost estimates developed by the two
maintenance departments.

It is possible that this approach lacks real integration because while the two maintenance plans
generate the majority of IZS’s costs, these plans are generated by the Civil Works and the Electrical
Works Departments. These IZS divisions do not control or manage the revenue from operators
and or from the MCTI. As a result, there is insufficient “operational” integration and balancing of
cost and revenue within IZS, as this only happens at the level of the infrastructure management
director. This makes it very difficult for IZS to argue that its decisions on where to spend available
funds is robust, as the decisions are predominantly cost and affordability driven, rather than being
worked out backward from the financial and operational targets that IZS is obliged to achieve.
Costs of Individual Maintenance Efforts Remain Unknown
Similar to the overall railway infrastructure work, developing a cost estimate for maintenance
includes the consideration of several cost categories. Reporting the maintenance cost involves
recording and reporting the actual costs incurred in the execution of a specific maintenance effort.
The cost coding currently in place in IZS provides for the recording of “actual” costs by category
but does not enable extracting the cost of individual maintenance efforts. Some of the costs are
reported in aggregate and not per line or per maintenance effort. As a result, the available cost data
are insufficiently granular, thus making estimates of maintenance work very difficult and imprecise.
This requires careful coordination and joint identification of cost drivers by IZS experts from the
planning, analysis, and accounting departments in order to ensure a suitable cost allocation across
the ledger. An overview of the current challenges per cost category is shown in table 2.
Table 2. Select Cost Categories in the IZS Accounting System and Their Use in Budgeting
ID Cost category IZS resource/cost IZS-external resource/cost
Captured in the AS. Can be reported per type of works Captured and reported per invoice but not per
1 Material
(Civils/Electrical) but not per project/ location. project/location.
Captured in the AS. Can be reported per type of works Captured and reported per invoice but not per
2 Fuel and lubricants
(Civils/Electrical) but not per project/location. project/location.
Total reported (depreciation) in Profit and Loss Account

3 Human Resources N/A
only

4 Plant and machinery N/A
only
Captured and reported per invoice but not per

5 Services N/A
project/location.

6 Other costs Reported in Profit and Loss Account only
only
Additional costs (scope variations, claims'

7 Maybe captured but not used in budgeting Maybe captured but not used in budgeting
settlement, "below the line" costs)
The cost exists and should be budgeted for but is not The cost exists and should be budgeted for but is not
8 Cost of access (possessions)
tracked by the IZS AS tracked by the IZS AS
Note: AS = accounting system; IZS = Serbian Railways Infrastructure (Infrastruktura Železnice Srbije).
Most importantly, while the current cost coding enables some level of identification of the location
where the cost was incurred, there is no code available for the project number and information
about why the cost was incurred in the first place (e.g., to enable a greater traffic load and greater
access charging revenue or the achievement of some strategic state goals for a specific line or
region). In consequence, IZS (i) has no accurate means to determine the total cost of its individual

maintenance efforts15 and (ii) is unable to pair the “actual” cost incurred and the “actual” revenue
generated per unit of output (line availability, train path, or similar), which is the basic information
required for any analysis of an operation’s financial contribution.
Cost Reporting Formats Mask the Intended Purpose of Maintenance Expenditure
In developing its annual maintenance plans, the IZS departments responsible for civil and electrical
works assemble a list of needs from the bottom up for each rail segment in the network. Despite
the limitations and challenges of the approach described earlier in this report, the plan ultimately
represents the proposed allocation of the budget between the revenue-earning assets—lines and
line sections. At a conceptual level this is a good approach. However, IZS’s maintenance plan does
not provide an expenditure total broken down by line category but a total broken down per cost
category. Such a breakdown is not useful as it does not reveal the context within which resources
are proposed to be allocated and does not provide insights into IZS’s decision-making process
behind the proposed maintenance plan.
Cost breakdowns by category are input based and as such cannot elaborate on how the proposed
resources will be used to achieve the targeted corporate goals. Input-based cost breakdowns may
be helpful if supported with an argument for where the funds will be spent (e.g., using a suitable
breakdown of expenditure per category).
Finally, the breakdown of the maintenance plan per cost category is submerged into the relevant
cost categories in a profit and loss statement. Even if the business plan is fully compliant with the
prescribed format for all public sector utilities in Serbia, it does a disservice to IZS as it does not
allow the company to put together a compelling story and argue why and how it goes about
delivering its obligations to the MCTI and the railway industry in Serbia. It also does not enable
IZS to elaborate its decision-making on a line-by-line basis and to rely on data to explain why the
expenditure program is needed. The current form of the document also makes it difficult for the
MCTI, as a party to the infrastructure contract, to review IZS’s managerial performance under the
contract.
This report proposes a way forward to resolve these issues and to establish the system that will
allow IZS to use cost data in decision-making processes and to use it as an input in the LCC model
(and, specifically, its application via the StE approach). These next steps are presented in chapter 3.
Also, it is important to reiterate at this stage that the establishment of a RAM system would allow
IZS to conduct a more methodical prioritization of maintenance and renewals, not only in
economic terms, but also taking operational and technical factors into account.
15Similarly, the current situation makes the budgeting of CAPEX works also difficult as IZS relies on tender prices for
the unit costs when budgeting for work that is to be completed by parties other than IZS. The tender prices used
therein do not reflect the completed work because they (i) are driven by the contractor’s aggressive pricing and
willingness to win work at a different point in time than the budgeted work is scheduled for; (ii) do not take account of
whether 100 percent of work has actually been completed for 100 percent of the funding; (iii) are unclear whether,
how, and if scarce resources and concurrent projects are taken into account in the unit cost calculation; and (iv) do not
reflect the “total outturn costs” since they do not account for variations in scope, legal settlements arising from claims,
and “below the line” costs that have not been budgeted for but have been incurred by IZS as a result of delivering the
works.

3. The Life-Cycle Cost Model
This chapter describes the application of the LCC method in support of effective rail asset
management. It begins by describing the principles underlying the methodology and the specific
points at which it can add value to an organization’s overall decision-making processes. This is
followed by an outline of the data required as inputs for the model, and the overall logic behind the
methodology.
System Adequacy
Rail is perhaps the most efficient land transport mode to move heavy commodities over long
distances. It is well known that railways excel when they are well maintained and are used to move
a large volume of freight over long distances. When used for passenger transport, railways may
excel in particular markets, such as for medium-distance travel in high-density urban and suburban
agglomerations. Thus, a rail system’s general assessment looks at the market (possible customers
in passenger and freight transportation) and production (number of trains operated). If both
variables are deemed adequate, then it becomes clear that assets need to be managed sustainably
and with a focus on long-term economic efficiency. System adequacy is thus based on the
determination of three main factors:
1. An adequate market—that is, if infrastructure capacity is appropriate, given market demand.
Capacity involves not only the actual amount of service but the quality as well. A railway
system should adjust capacity to meet changes in demand.
2. Adequate production, achieved once a predetermined number of trains and volume of
passengers and/or freight are transported on the system.
3. Adequate rail assets, based on predetermined standards for the size, quality, and amount of
each rail system component.
TU Graz, in collaboration with the Austrian Federal Railways (Österreichische Bundesbahnen,
ÖBB), set benchmarks for an adequate market for ÖBB. These benchmarks were used to assess
the passenger traffic and freight volumes of the Serbian rail network (tables 3 and 4).
Table 3. An Assessment of Passenger Traffic on Serbian Railways
Passenger Traffic
1 Average speed ≥ 60 km/h
(in competition with an overland road)
2 Degree of utilization of the infrastructure capacity ≥ 50%
(~ 40 trains per day)
3 Minimum utilization of rolling stock
40% of seats or 20% of seats and stance
4 Relation riding time: Holding time > 10 : 1
Potential passengers > 2,000 per day (60 min. isochrones) (about 50 passengers per
train)
Minimum demand
80 hop-ons/hop-offs per day for an additional station
(1 hop-on and 1 hop-off per train)
Note: km/h = kilometer per hour.

Table 4. An Assessment of Freight Volumes on Serbian Railways
Freight Traffic
1 Number of trains per day ≥ 1
(Infrastructure capacity usage)
2 Transport volume main network: Transport volume feeder line < 10 : 1
(one-tenth of the volume is operated on the feeder line)
3 Line category D4
(Axle load 22.5 tons and 8 tons meter load)
4 Percentage of maximum train length ≥ 50%
(~350 meters → 15–20 wagons)
4,000–5,000 wagons/250,000 gross tons per year
(about 15–20 wagons per day)
Minimum demand
500 wagons/20,000 gross tons per access point
(1 provided and 1 removed wagon per day)
Once system adequacy at the level of the market, production, and assets is considered, rail lines can
be assessed at a technical level to determine the best maintenance or renewal strategy, and the
remaining service life of assets. At this point, data can determine whether maintenance or renewal
is the best course of action for a given line or track. The first step in determining how to assess this
life cycle is to determine the data that are available about the network.
Options for Assessing a Track’s Life Cycle

Relevant data at this point include the age of a track and components, key maintenance work that
has been executed, and overall track quality. Depending on data availability, the technical
assessment can involve three levels of detail:
1. Anecdotal information. A general quality assessment may be based on anecdotal experiences,
traffic load, and rail line videos. This option relies on the general knowledge of staff to get a
general idea of where a track is in terms of its life cycle. This level of analysis is used only as
guidance and does not provide enough detail to carry out a more extensive analysis or
support a well-established asset management system.
2. Standard elements. Under this approach the railway organization will have some data about
the type of track components used in the construction of the structure, the year of
construction, maintenance performance since last renewal, and the cost of maintenance
activities and renewals. At this level of analysis, the LCC model can use the international
StE database at TU Graz to get an estimate of service life resulting from a particular
combination of track components. However, the StE approach lacks the cost input data
required for an accurate LCC estimate. This is because costs vary based on local economic
characteristics.
3. Automated track inspection data. The LCC model can also use data from a recording car at
different points in time. These data are more detailed and provide a better estimate of the
current conditions of the track and its remaining service life. As noted in the previous
section, in terms of condition of the assets, automated vehicles may take key
measurements, collected by instruments attended to by one or more operators. There are
many types of automated vehicles, ranging from self-propelled to towed and hi-rail
vehicles. Long experience shows a strong link between maintenance and service life. Thus,
using these data, service life can be forecasted based on past maintenance—and the level of
precision of such projections increases with the quality of input data.

In the Serbian context, the StE approach was shown to be the most suitable, given the level of data
available and overall knowledge of the network. This approach enables analysts to roll out the life-
cycle costs of a network. Generally, standard elements are a function of tracks’ technical boundary
conditions and service life, investment, and/or maintenance activity completed, as well as the
number of tracks and quality of substructure (soil). The entire network must be described in this
way. In the case of Serbia, the StE approach allowed IZS to glean the necessary information in the
most efficient way.
Track infrastructure is composed of crossties (or sleepers), rails, ballast, and subsoil. Each of these
components can take many forms depending on the track design and particular country standards.
Figure 7. Track Components
Rail
Ballast
Crossties
Subsoil
Source: Photo from TU Graz with information from the World Bank, 2020.
Ballast is the material used to form the bed of the railroad track and to maintain crossties in place.
In order to meet its function, ballast needs to be permeable and granular, and is placed under and
around ties to fix the structure in place. Ballast must provide adequate drainage by allowing water
through easily. Some of the materials used as ballast are granite, basalt, limestone, dolomite, and
gravel.
Sleepers (or crossties) are wooden or concrete beams laid transversely under the rails of a railroad
track to support it. Crossties can be timber, concrete, composite, and even steel. The most popular
types are wooden and steel. The ties normally are assembled together with the rails through steel
plates, fasteners, or other devices.
Rails are the steel bars laid on the crossties. The many types of rails vary depending on weight, size,
and type of steel. Continuously welded rail (CWR) has a length of 438 meters and performs better
for heavier or faster train operations. The other type of rail is “bolted” or “jointed” track. These
tracks are joined with bolts. A better alternative is to weld the different segments of rails, called
welded rail.

To consider the different track components and the types of these components available for
construction provides a set number of potential combinations. Once these standard elements are
identified, the next step is to come up with a detailed list of work cycles (expected maintenance
levels and renewal frequencies) for all relevant standard elements within the Serbian railway
network. These work cycles signify the current maintenance situation, that may be used as a
benchmark when planning more sustainable maintenance regimes. Required maintenance projects
then need to be ranked, in order of priority, using the LCC method.
The Work Cycles of Standard Elements

Maintenance is often constrained by financial or resource restrictions. One standard element (i.e., a
set of parameter values) can have different work cycles. It is a major task to assign work cycles for
an entire service life.
Different Sections, Different Ages
A work cycle involves different sections of the network fulfilling the same standard elements (track
segments with same components) (see figure 8, note, for an artificial network used for illustrative
purposes only). Sections are often of different ages and thus require maintenance efforts across
different time segments (see figure 9). It is important for the generated work cycle to merge input
data from different line sections (instead of showing a localized practice).
Figures 8, 9, 10 and 11 show how different sections in the network provide the data necessary to
generate work cycles. Each section was constructed at different points in time (in this example
section I in 1985, section II in 1975, and section III in 1990). There is also record about when the
first slow order was put in each section. Data between construction and slow order is the input
data for the work cycle. In this example, section I provides data for years 0 to 19 in the working
cycle, section II provides data for years 20 to 43, and section III provides data for section I
provides data for years 10 to 33.

Figure 8. Data for Work Cycles I
Note: See Appendix B for a clearer image. ML = main line; RL = regional line.

Figure 9. Data for Work Cycles I
Note: See Appendix B for a clearer image. CWR = continuous welded rail; SKL = tension clamp fasteners.
The Implications of Speed Restrictions

Speed restrictions generate additional years of service life. The economic impact of slow orders is discussed in section 2.4, but it is clear that speed
restrictions offer an opportunity to extract additional years of life for dedicated sections (with very low traffic volumes and/or freight trains only). In
general, it is impossible to compare work cycles and service lives with and without speed restrictions. It is therefore necessary to eliminate slow orders

from the existing data. This is done by shifting the maintenance cycles, as shown in figure 10. Years with slow orders at the end of a service life are a
simple cross-section of the time sequence.
Figure 10. Average Work Cycles

Note: See Appendix B for a clearer image. CWR = continuous welded rail; m = meter; ML = main line; R = radius; RL = regional line.

Averaging Different Sections
In the process of merging data, averaging is of great importance because it provides enough
historical data on maintenance and renewals to understand the behavior of that standard element.
For consecutive evaluations, it is necessary to work with geometric mean values (putting more
weight on data sets collected over a longer period of time), as the mean maintenance regime
multiplied by the total length of one standard element must sum up to the executed amount.
In this regard, it is important if average yearly values are displayed (e.g., 250 meters [m] of 1
kilometer [km] tamped every year or “0.25” in every cell) or if the cycle depicts a certain average
frequency of a task (e.g., 250 m of 1 km tamped every year or “1.00” every four years). In terms of
costs, these two possibilities deliver the same result.
Figure 11. Averaging Service Life across Different Sections
Note: See Appendix B for a clearer image. CWR = continuous welded rail.
Consolidating Work Cycles

After running through these first three steps, the resulting work cycle needs to be consolidated.
The process includes averaging various sections from different parts of the network, with different
ages and different philosophies of maintenance due to the human factor in local decision-making.
Assuming sustainable maintenance without strategic slow orders, the wear characteristics of a track
and its components ask for increased maintenance toward the end of a service life. This effect
should be represented, too, in the work cycles.
In particular, infrequent maintenance actions (e.g., rail exchange of outer rails in curves) must be
treated carefully and accurately. In some cases, averaging is not the accurate approach, but shifting.
In all cases, estimated work cycles should be cross-checked with expert knowledge before being
used for further evaluation.

Plausibility Check
In a similar way, the plausibility of each work cycle, in relation to the others, must be checked. This
process is especially crucial for the parameters “transport load” and “subsoil.”
It is obvious that larger transport loads typically result in more maintenance, but this is not
guaranteed under different maintenance approaches across different parts of a network. As long as
the link to service life is not dissolved, a closer look might reveal that a particular maintenance
frequency is the most economical.
The negative effects of poor subsoil conditions and inadequate or nonfunctional drainage are well
documented: maintenance of the ballast bed (levelling-lining-tamping) increases, and if ballast is a
crucial element for track service life (most likely in the case of concrete sleepers), service life
decreases as well. The classification of the parameter “subsoil” is not data driven, but rated
subjectively by a responsible track engineer, based on the behavior of the entire track. Since this
classification may differ across different parts of a network, its plausibility must be cross-checked
with relevant work cycles.
Cross-Checking with International Experience
Various infrastructure managers around the world have examined the StE approach and verified
their work cycles and service lives across executed maintenance and track renewal projects.
Using this experience, the parameter value linking maintenance frequency and service life can be
challenged when considering similar boundary conditions. The type of ballast in particular must be
taken into account, as it is crucial for the entire behavior of a track. In the case of the Serbian
network, work cycles for limestone existed as well as those for eruptive ballast.
Economics and Cost Data

Economic Evaluations
The work cycles (maintenance regimes) are the technical basis for the economic assessment, as they
define the actions to be taken and the service life, both decisive for setting up the payment flow.
Track Work Unit Costs
Transforming work cycles into payment flows is done by multiplying the amount by the unit costs
involved. These should include the full costs of track work, including machinery, material, labor,
and overhead costs. Ideally, the costs of track possession should also be included, including the
costs of operational hindrances.
Costs of Operational Hindrances
If a track is not ready to be operated without restrictions, train operating companies face
operational consequences—mostly train delays—that induce additional costs. These costs—for
example, overtime costs for train staff due to an especially long train run—are generally variable. If
a bus service takes over passengers, the costs include fixed-cost portions as well.
While closing a track to execute track maintenance has relatively few operational consequences,
and thus costs, in the case of a medium-loaded railway line, speed restrictions will cause delays in
the overwhelming number of cases. This is especially true where speed restrictions are already a
vital part of keeping the network operational, as is the case in Serbia.

Apart from discussing ways to monetize the operational consequences of speed restrictions, it is
obvious that any economic evaluation and any cost-based decision need to be based on a payment
flow that includes all monetary consequences and thus also the cost of permanent slow orders.
Because of this, a discussion within the Joint Stock Company (JSC) regarding a proper cost of
operational hindrances (COH) model is ongoing.
If monetization cannot be achieved, at least an agreement with the train operating companies
concerning the minimum speed on single lines should be considered, in case budget restraints
require slow orders.
Economic Service Life
In the strategic approaches outlined in this chapter, it is necessary that a single work cycle represent
the so-called economic service life. This is the case if the life-cycle cost reaches a minimum
threshold (looking at average annual costs or annuities) or if maintenance costs and depreciation
costs are optimally balanced. Overly expensive maintenance actions at the end of a service life are
thus avoided.

4. Implementation of the Life-Cycle Cost Method in IZS
Introduction of the Method and Preparatory Work

The first stage of the technical assistance consisted of two main activities; one was the introduction
of the LCC method to the staff of IZS and cargo operators and the other was testing the method
in four sections of the Serbian rail network. The kickoff of activities was done at a workshop held
in Belgrade during April 16–18, 2018, where the World Bank team provided a detailed
demonstration of the LCC methodology to representatives of the MCTI, IZS, Srbija Voz, and
Srbija Kargo.
In addition to providing a detailed description of the basic principles underlying the LCC
methodology, Professor Peter Veit (TU Graz and World Bank team member) gave a
demonstration using data for four Serbian rail segments. This was possible because IZS provided
data and agreed to learn and test the LCC method in Serbia by utilizing a set of case studies of the
Serbian rail network. This not only introduced the method but also demonstrated how it could be
implemented at different levels of data availability. At the end, this approach was successful in
showing how the LCC method can be used in Serbia to estimate the life cycle of specific rail
segments and used as a tool to determine the best way to proceed with infrastructure investments
(i.e., prioritizing maintenance or renewal of infrastructure).
The case studies used data provided by IZS for two main lines (Nova Pazova–Stara Pazova and
Lapovo–Brzani) and two regional lines (Adrani–Samaila and Loznica Factory–Gornja Koviljaca).
The request from LCC experts was to choose a set of rail segments that had a variety of traffic
volumes and were in various states of repair. Key points of the presentation during the workshop
were that the LCC method should be used as a tool in determining whether a rail line is actually
needed, if the operating conditions required for existing traffic volumes are appropriate, and if
existing assets are adequate to meet the transport needs of existing/prospective traffic. The
information supplied by the LCC model will consist of two main factors—the expected life cycle
of the track, and the cost optimization of renewal or maintenance activities that are appropriate for
the operating conditions and demand along the particular railway line. This information is
generated by the LCC method through a set of international standard elements.
As has been outlined earlier in this report, the use of international standard elements in the LCC
method is known as the Standard Elements (StE) approach. The approach enables the railway to
identify demand for track renewal based on track history and superstructure characteristics (rail,
sleeper, ballast, and subsoil). Extensive international experience has proven that particular
combinations of these elements yield a particular life-cycle cost which can vary with the level of use
and maintenance. The World Bank team utilized the StE approach in the four Serbian case studies.
The estimated LCC scenarios for each case were finalized after track maintenance and cost data
were received from IZS. Results were described in a report detailing the approach and the steps
necessary for the adoption of the LCC methodology in the Serbian context. One of the
conclusions of the April workshop was that IZS needed to be the entity behind the adoption of
this methodology in the Serbian context because it was to be the primary user. Adoption of the
LCC methodology would empower IZS in its decision-making process regarding the allocation of

track maintenance budgets, future capital investment, and other activities that are closely related to
the life cycle of infrastructure and its costs.
Subsequent to the April workshop, the World Bank team continued working on the development
of an Integrated Railways Database (IRD) for the Serbian rail network to consolidate infrastructure
and traffic data. The need for the IRD was decided during the April workshop and its development
was to ensure data availability for the eventual adoption of the LCC method over the entire Serbian
rail network. In its first phase, the IRD was structured into three main blocks: the asset register
(block 1), traffic data (block 2), and cost data (block 3). The asset register is the record of existing
track infrastructure such as type of rail, sleeper, or ballast, and condition of subsoil. Traffic data
include passenger and freight data for the particular rail segments following international data
conventions (i.e., Union Internationale de Chemins de Fer, UIC). Cost data pertain to the costs for
track maintenance and renewal in Serbia. The IRD follows the data structure in annex 6 of the
Serbian Railways Network Statement. This structure consolidates the data so that it can eventually
be utilized as an input for the network-wide adoption of the LCC method. The World Bank team
hired a new member in Belgrade who will be carrying out the formatting, merging, and cleaning of
the new database. As part of this effort, the World Bank team requested IZS to set up a point of
contact to work with the World Bank team to ensure that the IRD work was completed seamlessly.
While the main immediate intention was to start the development of the IRD, the long-term goal
of the team was for IZS and the Serbian rail sector to start the process of having a consolidated
database that could be expanded to include other data in the future.
Adapting the LCC Method to a Subset of the Serbian Rail Network

As noted above, the World Bank team agreed with the MCTI and IZS to first test the LCC method
on a subset of the Serbian rail network through four case studies. The results of the case studies
were presented during a second workshop in June 2018.
The LCC method results for the four Serbian rail cases were as follows:
• Nova Pazova–Stara Pazova is a 6 kilometer (km) segment with a design speed of 120
km/hour(h). The line has no speed restrictions, and freight trains operate at a speed
limit of 80 km/h. This is a main line with two tracks. Results show that the two tracks
still have adequate service life left. However, one of the tracks has already lost some of
its service life that will not be possible to recover (Track A). In the best case, under
sufficient maintenance practices, Track A would end in 2023 (without speed
restrictions). Track B is still within its optimal service life, and under adequate
maintenance, its service life would end in 2043.
• Lapovo–Brzan stajaliste is a 4.6 km segment with a design speed of 120 km/h. The
segment is double tracked but the prescribed speed on the left track is 50 km/h and 70
km/h on the right track. This is a main line. In this case, the LCC method indicates that
the service life for both tracks has already been reached and costs will increase
continuously until tracks are renewed. The best time to re-lay the tracks would have
been 2014, so it is important to reinvest in the line in the near term.
• Adrani–Samalia is a 5.8 km segment with a design speed of 100 km/h. There are no
speed restrictions on the line. This is a regional line. Service life of this line has been
reached. However, its costs are flat and its service life can be extended but major

maintenance (tamping or sleeper exchange) should be avoided as that would increase
total costs. Instead, track renewal is a better option as service life has been reached.
• Loznica fabrika–Gornja Koviljaca stajaliste is 8.3 km segment with a design speed of
100 km/h. Current prescribed speed is 10 km/h. This is a regional line. This track
segment is well beyond its service life and renewal track work is urgently needed. The
line still has demand for freight that justifies its renewal, and it would make sense to
carry out reinvestment. Operation on the line beyond its service life reflects speed and
load restrictions, and poor safety performance on the line.
While the results of the case studies were interesting and insightful, more importantly, the lesson of
the first stage was that the LCC method can be successfully implemented in Serbia. This is because
enough data exist within IZS to use the LCC method, and data would become more readily
available once the IRD was completed. These two factors persuaded IZS to move forward with the
implementation of the LCC method over the entire Serbian rail network.
Scaling up the LCC Method to the Entire Serbian Railway Network

The first step in the implementation process, launched at the June 2018 workshop, was to create a
working group within IZS with a good cross-section of expertise about the rail infrastructure
network, maintenance practices, accounting, and field work. The appointment of such a group was
led and championed by the director responsible for infrastructure maintenance.16 The group was
created before the workshop was held, through email communication. Then, at the workshop, the
group worked to generate parameter sets that reflect the context of the Serbian railway network.
During the workshop, Professor Veit explained that in order to implement the LCC method in
Serbia, the team needed to see the rail network as the sum of various standard elements of the
track. These standard elements would be based on the parameter sets that are common in Serbia
and international experience in the use of components for track construction. A parameter set is
considered to be a combination of components that are commonly used to build tracks in
particular systems. Following this guidance, 11 parameters were identified to create the relevant
parameter sets. These are outlined as follows.
Traffic load. International experience shows that the relevant traffic load on tracks in Serbia would
range between 0 and 45,000 gross tons per day. For Serbia, this parameter has six categories, as
shown in table 5. However, the Serbian rail network does not have rail lines with loads of more
than 45,000 gross tons per day, so categories at this level or above can be excluded.
16 Mr. Milan Segan, Former Manager for Regional Cooperation, IZS.

Table 5. Traffic Load Categories
Traffic Load
<2,000
2,000–5,000
5,000–8,000
8,000–15,000
15,000–30,000
30,000–45,000
45,000–70,000
70,000<
Track geometry—radius. Serbian rail lines normally have a radius of less than 200 meters (m) to more
than 600 m. Under this parameter, the working group decided to remove alignment categories
between 1,000 m and 3,000 m and more than 3,000 m that are often observed in other European
railways.
Table 6. Rail Line Radius
Alignment
(R<200 m)
250 m ≤ R<400 m
400 m ≤ R<600 m
R>600 m
3,000–1,000 m
>3,000 m
Note: m = meter; R = radius.
Subsoil quality. This is the only parameter that is not measured but is more an observation by experts
that must try to fulfill a description. Good subsoil does not impact maintenance demand or service
life. Standing water means that subsoil has a problem with drainage. Soiling means that residue
needs to be removed from track structure in order to recover the state of repair. Soiling and
standing water mean that track structure is being affected by the presence of both soil and water.
Table 7. Subsoil Quality
Subsoil
Good
Water
Soil

Water and soil
Sleeper type. The Serbia case presents two main sleeper types: concrete and wood. This is similar to
the international experience.
Table 8. Sleeper Types
Sleeper Type
Concrete SKL
Wooden K
Wooden nails
Note: K = k type fastening; SKL = tension clamp fasteners.
Rail type. Table 9 includes three rail parameters: rail profile, steel grade, and welding type. This is the
rail type that is used to build the track and specifies the steel and other quality characteristics that
will determine the strength, quality, and durability of the rail. For Serbia, 49E1 and 60E1 rail
profiles were identified. As can be seen in table 9, both continuous welded rails (CWR) and jointed
rails are used in Serbia. In terms of steel grade, R260 is the main steel grade used in Serbia and no
other steel grades are included in the parameter set.
Table 9. Rail Types
Rail Profile Welding Type
49E1-R260-CWR Alumino-thermic
60E1-R260-CWR Flash-butt
49E1-R260-jointed
60E1-R260-jointed
(Xa-R200-jointed)
Note: CWR = continuous welded rail.
The remaining parameters are self-explanatory. In terms of ballast there are only two main ballast
types used in Serbia: limestone and eruptive. There are both single- and double-tracked lines in
Serbia.
Once these parameters and their viable values were identified, the working group came up with the
most likely combinations to be used in Serbia. This was based on their experience and knowledge
of the Serbian railways. These parameter sets are shown in table 10. The objective at this stage was
to cover as many kilometers as possible by finding the most common component combinations.
The 11 parameter sets in table 10 are likely to cover a large percentage share of the Serbia network
with the goal for the working group to cover 80–90 percent of the total railway network.

Table 10. Parameter Sets Identified for Serbia
Line Category Traffic Load Alignment Sleeper Type Rail Type Welding Type Ballast Subsoil
StdE 1 Main Line (Corridor) 8,000-15,000 R>600m Wooden K 49E1-R260-CWR alumino-thermic Limestone good
StdE 2 Main Line (Corridor) 8,000-15,000 R>600m Concrete SKL 60E1-R260-CWR alumino-thermic Eruptive good
StdE 3 Main Line (Corridor) 8,000-15,000 400m≤R<600m Wooden K 49E1-R260-CWR alumino-thermic Limestone good
StdE 4 Main Line (Corridor) 8,000-15,000 R>600m Wooden K 49E1-R260-CWR alumino-thermic Limestone water and soil
StdE 5 Regional Line 2,000-5,000 R>600m Wooden K 49E1-R260-CWR alumino-thermic Limestone good
StdE 6 Regional Line 2,000-5,000 R>600m Wooden K 49E1-R260-CWR alumino-thermic Limestone water
StdE 7 Regional Line 2,000-5,000 250m≤R<400m Wooden K 49E1-R260-jointed Limestone good
StdE 8 Regional Line 2,000-5,000 R>600m Concrete SKL 49E1-R260-CWR alumino-thermic Eruptive good
StdE 9 Local Line <2,000 R>600m Wooden K 49E1-R260-jointed Limestone good
StdE 10 Local Line <2,000 R>600m Wooden K 49E1-R260-jointed Limestone water and soil
StdE 11 Local Line <2,000 250m≤R<400m Wooden K 49E1-R260-jointed Limestone good
Note: CWR = continuous welded rail; K = k type fastening; m = meter; R = radius; SKL = tension clamp fasteners.
Once these 11 parameter sets were generated, the World Bank team and the IZS working group
agreed to move forward in designing 11 work cycles for the Serbian rail network. Work cycles are
the normal (expected) maintenance levels, renewal frequencies, and the life of the parameter sets in
a particular country (in this case, Serbia). Eleven work cycles were chosen that were likely to cover
a significant portion of the network and provide a good learning experience to the working group.
The work cycles were then to be discussed in a workshop in November 2018 with the World Bank
transport team.
In the interim, three IZS working group members visited the Austrian Federal Railways
(Österreichische Bundesbahnen, ÖBB) headquarters in November 5, 2018. The visit allowed IZS
staff to observe how ÖBB uses the LCC method in its day-to-day activities and establish a
professional link with ÖBB experts on life-cycle costs. The visit was coupled with attendance at the
World Bank’s Railway Conference in Vienna, which brings in international experts on rail asset
management.
Subsequent to the site visit to the ÖBB headquarters, the World Bank team, the MCTI, IZS, and
the railway operators held a two-day workshop to review the IZS Standard Elements proposal.
This workshop targeted the resolution of any pending questions and issues that required discussion
and advice. IZS gathered the original data on yearly maintenance executed in different sections
representative of the parameter sets. Based on these data and after removing temporary
(maintenance) and permanent (end-of-life) slow orders, the work cycles could be set up (e.g., figure
12). The work cycles were then subject to plausibility checks and cross-checking against
international experience.

Figure 12. Standard Element I
Line Category Alignment No of Tracks Service Life
Main Line (Corridor) R>600m 28
Traffic Load Rails Sleepers Ballast Subsoil
8,000-15,000 49E1-R260-CWR Wooden K Limestone good
Track Work 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Renewal 49E1 Wooden K Limestone 1
Levelling-Lining-Tamping 1 1 1 1 1 1 1
Spot Tamping 1,1 2,0 2,8 2,7 3,7 4,1
Rail Grinding
Rail Exchange 49E1
Short Rail Exchange 49E1 0,8 0,8 1,6
Sleeper Exchange Wooden K 0,5 0,9 1,3 3,7 2,0
Ballast Cleaning
Ballast Cleaning - Spots
Rail Fastening Exchange 20
Speed Restriction 100
Line Speed
Note: CWR = continuous welded rail; m = meter; R = radius.
Another important part of a standard element is maintenance and renewal activity. This information was incorporated into the table by adding
numeric information regarding each type of activity. The numbers for maintenance activities reflect the work performed in intervals of a kilometer of
track.
The standard elements represent the components of the track structure, the maintenance and rehabilitation work, and the life of the track. Once this
information is in place in a table, the economic information can be included to assess life-cycle costs of the infrastructure. In the Serbia case, this
process started by IZS providing cost maintenance and renewal costs for Serbia (see table 11).

Table 11. Maintenance and Renewal Costs
Type Activity Unit Costs per Meter
General renewal General renewal (rail, sleeper, ballast) 661
General renewal (rail, sleeper, ballast) with subsoil rehabilitation 716
Partial renewal Rail and ballast renewal 343
Rail and sleeper exchange 463
Sleeper and fastener exchange 343
Ballast and sleeper renewal 370
Heavy maintenance Subsoil rehabilitation (without exchanging track components) 56
Ballast cleaning through-going 25
Levelling lining tamping through-going 37
Grinding 6
Rail exchange (one rail) 10
Rail exchange (both rails) 20

Rail joint repair (in case of not CWR) 11
Small maintenance Small maintenance costs per meter or costs per piece Unit costs per meter
Ballast cleaning (some meters) 31
Spot tamping (at critical points) 6

Single sleeper exchange 23
Short section rail exchange (some meters) 8
Cleaning ditches 1.4
Fastening repair 8
Additional small maintenance As a summary of all not mentioned additional work (mainly manual) 3.4
Note: CWR = continuous welded rail.

In addition to the maintenance and renewal costs in table 11, the LCC method also needs the cost
of operational hindrances and passenger or cargo operators (e.g., restricting speed or even axle
load). These figures are not currently available for Serbia and were calculated based on Austrian
cost figures. While the cost of hindrances (interruptions) is not the actual cost, modifying Austrian
figures with Serbian purchasing power parity will account for this cost element, which is key to
getting an LCC estimate that more closely reflects the total life-cycle costs of infrastructure.
The economic evaluation of the standard elements is key to informing the decision-making
process. Investment in infrastructure (as opposed to the life-cycle cost of infrastructure) does not
provide the full information need. Economic evaluation is shaped by three important
characteristics of infrastructure: (i) infrastructure has no direct revenues, (ii) infrastructure is
extremely expensive (investment and maintenance is a better reflection of full costs), and (iii)
infrastructure has a long service life (the time value of money needs to be factored into the
equation).
A basic principle of an economic evaluation is to consider any investment needs and take all related
cost effects into account. Since every investment has cost consequences (as long as an asset is in
operation), the only proper way to conduct an evaluation is an LCC-based one. Therefore, the
longer the service life, the more important it is to use life-cycle costing. In addition to the
economic characteristics of infrastructure, there is a need to be able to compare different
investment options (different projects) with different investment levels and different service lives.
Differences in a project’s investment levels and service lives means that annuities offer the best way
to make costs comparable across investment options. At the end of the day, an infrastructure
project will lead to a time sequence of costs from track renewal to track renewal. The standard
elements deliver these time sequences of costs and can thus form the basis of defining general
netwide strategies. Specific project descriptions provide a stream of costs that can be adjusted for
the time value of money and made comparable through an annuity calculation. The first step is to
calculate the net present value (NPV) of the project cost flows. NPV can be used to compare
different options only if service lives are similar. As this is normally not the case for track
infrastructure, annuity can be used to compare the different options. The annuity is calculated by
multiplying the NPV by the annuity factor CF:
(1 + 𝑖)𝑡 ∙ 𝑖
𝐶𝐹 =
(1 + 𝑖)𝑡 − 1
Annuity = CF x NPV
First Results of LCC Implementation in Serbia

A first prototype of the LCC model has been implemented in Serbia using the work cycles,
estimates of track costs, and costs of hindrances. Initial results confirm international experience on
the matter in that:
• Speed restrictions are not economically efficient, neither for shifting maintenance costs nor
for prolonging service life;

• Poor subsoil and/or drainage quality is more expensive in the long run—the economic
efficiency of subsoil rehabilitation seems to be well justified;
• Concrete sleepers are the economically preferable choice if the use is accompanied by
higher ballast quality (eruptive ballast instead of limestone).
The Integrated Railways Database (IRD) and the LCC method are now being used by IZS, and it is
clear that as a consequence of deferred maintenance across multiple years, and a limited
maintenance budget for the appropriate management of IZS infrastructure, a considerable backlog
of renewal work has developed over the past 20 years. On the other hand, IZS assets must be
maintained and renewed in order to sustain network serviceability and performance. The
infrastructure usage costs are largely dependent upon whether and how the balance is struck
between maintenance and renewal. Any trade-offs need to consider the key components (asset
condition, rate of degradation, life-cycle costs, resources, technology, and access and/or
performance regimes). Although the criteria for maintenance-renewals trade-offs varies across
different assets, two principles apply to all asset groups:
• Assets maintained to a higher standard require a greater level of maintenance but are likely
to require less frequent renewals;
• Reduction in the maintenance effort will generally cause assets to degrade more quickly—
both through natural deterioration and usage—leading to a more frequent requirement for
renewals.
IZS developed an integrated railway database with the following characteristics:
• The database covers all assets and provides all asset-related information on any stretch of
the network.
• All traffic flows are tracked (no of trains, train-km, net-ton-km, gross ton-km, tons).
• The database includes an interface with the cost accounting system.
IZS established a dedicated working group to test implementation of the StE approach:
• The approach is now piloted within IZS with a view to assist with identifying the most
cost-efficient option for IZS to extend service life of its assets on particular line sections.
• The approach is applied on a number of characteristic stretches of the network and, once
applied across the network, is intended to serve as a direct input for the maintenance plan.
• The piloted decision-making approach embraces the focus on customer services as it takes
into account the impact of any maintenance and/or renewal works on the operators’
delivery of transport services to customers.
In addition to these findings, IZS also developed a computer software that consists of the
following modules:
1. Logical and physical model of the data, process, and functions (according to the requests
and needed parameters of LCC methodology).
2. Creation of the Microsoft SQL Server database (according to the requests and needed
parameters of LCC methodology) for 1,906 km of the railway network.

3. Integration of the parameters of the LCC methodology with the IRD (interface between
LCC and IRD).
4. Data interface module for the creation, input, and updating of data for rail sections with the
standard elements (traffic load, curves, rails, sleepers, welds, ballast, substructure situation).
5. New section module for the creation of the unique sections of the standard elements.
6. LCC estimation module for the calculation of the costs of maintenance and renewals using
the LCC method. This includes present value discounting and calculation of annuity values
for the life-cycle costs of track for the defined life expectancy and defined discount rate
(according to LCC methodology).
Screen shots of the program are included in appendix A.

5. Recommended Next Steps
Recommendations for MCTI and IZS

During the preparation of the technical assistance, IZS and the World Bank team determined that
implementation of the Standard Elements approach across the Serbian rail network must be
followed by three groups of actions in support of full LCC implementation. The actions relate to
cost estimating, cost coding, and the augmentation of management reporting. IZS is currently
identifying the most efficient option to implement each of the actions.
The main objective of the implementation plan is to equip IZS to improve toward consistently
deploying the available funds in a way that generates the best returns, and in turn, delivers the
improved management of its assets throughout their life cycle. This capacity does not yet exist
within IZS in practical terms. Maintenance decisions are still made based on track conditions and
need for repair. Based on observations of the IZS maintenance value chain, four key improvement
objectives may be identified:
• Equip IZS to analyze its own efficiency in the delivery of service life and cost recovery. This technical
assistance has created the capacity within IZS to analyze service life and cost recovery, but
more can be done so the knowledge in the working group is institutionalized and becomes
part of the organization.
• Prepare output-driven maintenance plans. It is key for the LCC method, database, and related
software to be used to generate output-driven maintenance plans. Such plans can then be
used in budget deliberations with the Government of Serbia to determine the best way
forward to improve the service level of the network.
• Identify the cost of individual maintenance efforts. Current cost accounting does not have the
capability to identify where maintenance funds are being spent in the network. To rectify
this would enable the mapping of maintenance investments in the rail network and more
accurate data for use in the LCC method. This in turn would provide better information
regarding the remaining service life in the network and areas of the rail system that require
attention. Furthermore, this would enable decision-makers to know if resources are being
spent in those segment of the network that have higher volumes of traffic.
• Strengthen management reporting in support of line-by-line decision-making. This would increase
transparency and strengthen the dialogue between all stakeholders in the railway sector.
Detailed information about the management of assets would enable IZS to focus
negotiations and conversation about the state of rail infrastructure to the specific areas of
concern and to highlight where the focus should be directed.
• Strengthen integration of RAM tool with decision-making process. This is to ensure that outputs and
documents being produced by the LCC model and the other components of the emerging
RAM system are used in the planning process for maintenance and renewals of
infrastructure. Furthermore, the outputs of the RAM system should also be integrated in
overall management decisions within IZS and for IZS’ dealing with MCTI, Serbia Cargo,
and Serbia Voz.
For practicality, the proposed implementation plan is structured around four specific groups of
tasks:

1) Appoint and empower the IZS Working Group to manage the implementation scope;
2) Implement a robust cost estimating approach;
3) Enhance cost coding to enable maintenance project identifications;
4) Augment management reporting.
In terms of improving the LCC method, IZS and the rail sector in general should establish a
through-going life-cycle management in which all decisions are taken focusing on a sustainable,
future-oriented railway system. Specific next steps for the LCC method are:
• The set of standard elements needs to be enlarged so long as standard elements cover 80 to
90 percent of the network.
• Track costs must be delivered and documented on a uniform basis.
• Speed restrictions must be monetized using an approach that is feasible given the existing
data.
If these challenges are addressed, the Standard Elements approach can support:
• The identification of necessary maintenance and renewal budgets in order to guarantee a

sustainable railway infrastructure ready to cope with future loadings.
• The identification of components to be used for different parts and lines in the network.
• Decision making on single reinvestment projects if local data are added.
• The development of a track asset management database system that integrates the LLC
model, IRT, and GIS.
As the IZS working group started in mid-2018, it is now constituted by informed and experienced
members who have already delivered first results. As a result, this group is well positioned to play a
key role in implementing the next steps with proper support from the leadership of the company
and decision-makers in the Government of Serbia.
Furthermore, the LCC method should be used extensively in the upcoming years as the Serbian
railway systems sees a significant increase in investment to rehabilitate its rail lines. This will
provide an easy-to-use tool in determining investment options and estimating life-cycle costs for
new infrastructure, avoiding potential mistakes that could affect performance of the railway sector
in the long term or reduce its long-term sustainability.
Recommendations for the World Bank

This technical assistance allowed the World Bank team to support IZS staff in implementing the
LCC method in the Serbian railway system. This is an important achievement given that previous
experience was limited to transferring knowledge about the principles of life-cycle costing through
workshops and on using the LCC method in isolated case studies for particular line segments.
Success in adopting the LCC method in Serbia can be scaled up by developing a computer software
that contains the international experience captured by standard elements in the TU Graz model.
This could be developed through a cooperative arrangement between the World Bank, TU Graz,
and other international finance institutions that provide technical and financial assistance in the
railway sector. The World Bank team should explore asset management experience in other modes

of transport such as HDMI4 to determine the best model to follow for the development of a
similar tool for railways.

Appendix A. Screenshots of the Serbia Railways LCC Computer
Program

Source: IZS.
Note: IZS = Serbian Railways Infrastructure (Infrastruktura Železnice Srbije); km = kilometer; LCC = life-cycle cost; m
= meter; RSD = Serbian dinars; WB = World Bank.

Appendix B. Work Cycles
Figure B.1 Data for Work Cycles I
Source: TU Graz.
Note: ML = main line; RL = regional line.

Figure B.2 Data for Work Cycles I
Source: TU Graz.
Note: CWR = continuous welded rail; m = meter; R = radius; SKL = tension clamp fasteners.

Figure B.3 Averaging Work Cycles
Source: TU Graz.
Note: CWR = continuous welded rail; m = meter; R = radius; SKL = tension clamp fasteners.

Serbia Railways Asset Management Plan Using Life Cycle Costs

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Serbia Railways Asset Management Plan Using Life Cycle Costs

Uploaded by

Copyright:

Available Formats

Public Disclosure Authorized

Report No: AUS0001540

Serbia Railways Asset Management Plan

Using Life-Cycle Costs

Document of the World Bank

© 2020 The World Bank

Some rights reserved.

Rights and Permissions

Document of the World Bank

Figure 1. Key Elements of the Rail Asset Management Process ....................................................................... 12

Document of the World Bank

Table 1. Mapping of Ongoing Initiatives and IZS Obligations ........................................................................ 17

Document of the World Bank

Document of the World Bank

CAPEX capital expenditure

Document of the World Bank

Document of the World Bank

Document of the World Bank

• Strengthen management reporting in support of line-by-line decision-making. This would increase

Document of the World Bank

• Track costs must be delivered and documented on a uniform basis.

• The identification of necessary maintenance and renewal budgets in order to guarantee

• A decision on a reinvestment project if local data are added.

Document of the World Bank

1 A fourth company was created to liquidate unneeded assets.

Document of the World Bank

Document of the World Bank

Document of the World Bank

Effective asset management depends on in-depth knowledge of the assets in question, an

Document of the World Bank

The Importance of Data Collection

Document of the World Bank

Overview of the Current Situation in IZS

Document of the World Bank

Note: HR = human resources; HS = high speed; IT = information technology.

Main Institutional Obligations

Document of the World Bank

Summary of Ongoing Initiatives

• Development of an integrated infrastructure database (“IID”);7

6 IZS network statement 2019.

Document of the World Bank

Note: IZS = Serbian Railways Infrastructure (Infrastruktura Železnice Srbije).

Development of an Integrated Railway Database

Document of the World Bank

Figure 5. Structure of the Integrated Railway Database

SRIM SRIM SRIM SRIM SRIM SRIM

SRIM/Voz Data source: SRIM/Voz Data source:

SRIM/Cargo Data source:

SRIM SRIM SRIM SRIM SRIM

Annex 6 SEETO forms Diagnostic DataSEETO SRIM

(Network Data source: Data source:

SRIM SRIM SRIM SRIM

Statement) SRIM/Voz(TBD how toSRIM/Voz SRIM/Cargo SRIM/Cargo

Annex 6 SRIM Diagnostic SRIM SRIM

Document of the World Bank

Introduction of the LCC Model’s Standard Elements Approach

13 S&T Serbia d.o.o.

Document of the World Bank

Note: IZS = Serbian Railways Infrastructure (Infrastruktura Železnice Srbije).

Document of the World Bank

Document of the World Bank

Challenges in the Current Process Underlying Track Maintenance

Document of the World Bank

Total reported (depreciation) in Profit and Loss Account