Valuing Pavement Network Assets and Use of Values

as Decision Supports
Shameem A. Dewan, P.E., M.ASCE,1 and Roger E. Smith, P.E., F.ASCE2

Abstract: The value of an asset, the worth calculated using a specific valuation method and perspective, can be utilized to justify and
support asset management decisions. The value of a public asset is an indicator that can help establish the accountability of managing
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agencies to asset owners and can be used in the justification of funding needs. The value of a pavement network helps the tax-paying
public 共owners兲 understand how well their pavements are being maintained. Asset values can be included in the management system
framework used for managing particular assets. Besides agency’s accountability and justification of funding needs, pavement network
values can be used as indicators showing the network’s performance in providing intended services. The objective of this paper was to
discuss appropriate methods and perspectives of valuation for a pavement network and incorporate network values in management system
framework to evaluate funding alternatives. Using appropriate network level analyses, the paper demonstrates asset valuations using
selected techniques and perspectives, and the impacts of management strategies on network values.
DOI: 10.1061/共ASCE兲1076-0342共2005兲11:4共202兲
CE Database subject headings: Pavement management; Assets; Decision support systems.

Introduction
The value of an asset is the worth of that asset calculated using a
specific valuation method and a specific valuation perspective.
Asset valuation is needed for a variety of reasons including help-
ing improve managerial decision making, justification of mainte-
nance expenditures, and calculation of rate of return on assets.
It is used in standard reporting, depreciation schedules, asset
condition assessments, and auditor requirements 共Byrne 1994兲.
Agencies managing public assets need to show accountability to
asset owners 共public兲 and justify requests for needed money to
maintain those assets to the funding authorities 共Mansour-Moysey
and Semmens 2001兲. Incorporation of asset values in an asset
management system framework can support funding requests
for alternative strategies. Valuing public infrastructure assets
has become more important as the managing agencies change the
way they account for public assets and move toward a corporate-
type business strategy 共Falls et al. 2001兲. It became more critical
after the Governmental Accounting Standards Board 共GASB兲 es-
tablished new requirements, referred to as GASB 34 共GASB
1999兲, for the annual financial reports of state and local govern-
mental agencies.
Value is a subjective quantity that must be addressed within a
context of time, place, potential owners, and users. The valuation
approach used should reflect the purpose of valuation, which is
usually linked to the stakeholders’ interests. Different valuation
approaches can estimate significantly different values for the
same asset at the same point in time. For example, valuation
approaches focusing on costs are likely to produce different re-
sults than those focusing exclusively on benefits. Although sev-
eral methods of valuation are available, a managing agency needs
to decide which method共s兲 should be used for their objective of
valuation and the type of assets.
A network level analysis was conducted to demonstrate the
process of valuation and the use of values in an asset management
approach applied to pavements. A Calif. county database was
provided by the Metropolitan Transportation Commission 共MTC兲
of Oakland, Calif. for this analysis. This pavement network in-
cluded 232 km of arterials, 90 km of collectors, and 446 km of
residential streets. The MTC Pavement Management System
共PMS兲 software was used for initial data analysis, but additional
calculations were needed to achieve the end results. The analysis
was conducted over a 20-year analysis period to consider the
long-term effects of management and funding strategies on asset
values.

1
Materials and Geotechnical Engineer, Hoque and Associates, Inc.,
1797 W. University Dr., Suite 167, Tempe, AZ 85281. E-mail:
shameemdewan@hotmail.com
2
Professor and Associate Head, Dept. of Civil Engineering,
3136 TAMU, Texas A&M Univ., College Station, TX 77843. E-mail:
roger-smith@tamu.edu
Note. Discussion open until May 1, 2006. Separate discussions must
be submitted for individual papers. To extend the closing date by one
month, a written request must be filed with the ASCE Managing Editor.
The manuscript for this paper was submitted for review and possible
publication on May 19, 2003; approved on June 11, 2004. This paper is
part of the Journal of Infrastructure Systems, Vol. 11, No. 4, December
1, 2005. ©ASCE, ISSN 1076-0342/2005/4-202–210/$25.00.
Valuation Perspectives
The value of a road network can be defined from several different
valuation perspectives such as the value to a managing agency, to
road users, or to a society as a whole. It is possible that the same
road could have completely different values to the agency, user,
and society. The values of two separate road sections with the
same condition could be the same to the managing agency, but a
more important or heavily traveled section usually has a higher
value than a less utilized section of road to the users 共Kadlec and
McNeil 2001兲 or the society. Opposite situations 共same impor-
tance but different conditions兲 are also possible.

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J. Infrastruct. Syst. 2005.11:202-210.

 Value to Agencies
The value to agencies can be based on what it costs the agency to
construct and maintain the pavement network. It should also in-
clude the loss of value due to depreciation which can account for
use and impacts of time and environment. The calculation of
agency value is relatively easy and reliable provided all the cost
components are available and a model for depreciation is utilized.
The GASB 34 valuation is based on the agency perspective
with some specific requirements. The “depreciation method” re-
ports values from the historical costs after depreciation and the
“modified approach” uses an undepreciated historical cost pro-
vided agencies can demonstrate, using a comprehensive asset
management system, that the asset has been adequately main-
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tained 共Kadlec and McNeil 2001兲.
Value to Users
The value to users can be based on user costs. Under normal
traffic operation, the user costs can include vehicle operating, user
delay, accident, emission, and other costs 共Arditi et al. 1999兲.
Whereas it is comparatively straightforward to calculate agency
costs, calculating user costs is often difficult because many of the
parameters required for these calculations such as the dollar value
of time or an accident are difficult to estimate and sometimes
controversial 共Arditi et al. 1999兲. Estimating costs due to emis-
sions, in dollar value, is also a difficult task. Vehicle operating
costs 共VOC兲 are somewhat easier to estimate than any of the other
components of user costs; however, no recent studies have been
completed to document this for current vehicles. The reduction in
VOC, a major road-user benefit from pavement maintenance and
rehabilitation 共MR兲, has been estimated using available past mod-
els. The outcome from these models can be presented to funding
authorities to show the magnitude of the impacts generated by
road improvements. The reduction in VOC due to road surface
improvements can be considered as an improvement in value
共benefit兲 to the users.
Value to Society
A road improvement can have numerous other positive and nega-
tive impacts on society including: 共Forkenbrock et al. 2001兲:
1. Social effects: Enhance or limit accessibility to family,
friends, and community resources, need to relocate, and
changes in choice of travel modes;
2. Economic effects: Economic development, land and property
value, effects on competitiveness of businesses, and linkage
between residences and jobs;
3. Aesthetics: Visual quality and traffic noise and vibration; and
4. Environmental: Air quality, wet lands, and stream pollution
from runoff, etc.
Estimating the monetary value of a road network to society is
complex and currently unreliable because of many interdependent
and unpredictable factors involved. For example, a change in road
condition may provide improved access to an area, thereby in-
creasing property value in that area. On the other hand, properties
adjacent to projects may decline in value as a result of their prox-
imity to the facility, or those living near the new facility may
experience an increase in air pollution 共Forkenbrock et al. 2001兲.
Other difficulties in estimating social costs include lack of a
record of historical data, lack of experience, subjectivity and
gross speculation in estimating, and the fact that they can easily
be disputed 共Arditi et al. 1999兲.
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J. Infrastruct. Syst. 2005.11:202-210.
Suggested Agency Valuation Methods
A valuation in the agency perspective is a more direct way of
valuing assets than the valuation in user or society perspective.
There are different techniques available to value an asset in
agency perspective. The appropriate method for an asset depends
on the type of asset and the purpose of valuation. Brief definitions
of the terms and methods relevant to asset valuations associated
with the strengths and weaknesses of these valuation methods are
described in Table 1. All the valuation methods in Table 1 de-
scribe agency perspective of valuations. Considering the strengths
and weaknesses of these methods, the book value and replace-
ment cost methods can be the preferred methods for valuing a
pavement network 共Falls et al. 2001兲 and are used for valuations
in this study.
Book Value Method
The book value of assets gives an indication of the financial
health of the organization. The life and the value of a road largely
depend on how well it is being maintained, and this method can
be relatively straightforward if all data are available. The data
include procurement costs, treatment costs, and depreciation
costs. To value an agency’s infrastructure assets in this method,
the valuing agency must define which funds spent on the infra-
structure should be considered as capitalized expenditures and
which part should be considered as expenses to maintain the
asset. The distinction between maintenance and capital work are
sometimes difficult to determine. In general, funds spent to im-
prove a facility beyond its original useful life 关the time until the
pavement condition index 共PCI兲 reaches a minimum acceptable
condition to drivers where a minimum acceptable condition is a
condition when a reconstruction or major renovation is needed,
such as PCI= 25兴 should be capitalized while those spent to main-
tain the facility at its originally established life should be ex-
pensed 共GASB 2000兲. The value of an infrastructure asset
changes due to significant improvements, damage, usage, or wear.
MR treatments are applied to pavements depending on the road
condition and the overall goals or strategy of the managing
agency, and it is not always easy to determine if the work in-
creased the capacity beyond the original or maintained the origi-
nal capacity. Careful judgment must be exercised. One should be
consistent in using a method and the method should be docu-
mented 共Beattie 1998兲.
The policy for differentiating capital work and maintenance
expenses can vary based on the type of management strategy and
the policy of the managing agency. For example, an agency’s
policy could be that an overlay or rehabilitation treatment in-
creases the useful life of the pavement asset, whereas a routine
maintenance treatment does not; or a preventive maintenance
treatment 共e.g., a slurry seal兲, as a part of the preservation pro-
gram, increases the useful life of a pavement. From these types
of considerations, some qualitative plots as shown in Figs. 1共a–d兲
could be used to explain capitalization and expenses more clearly.
The figures show that pavement condition improves with the ap-
plications of preventive maintenance, overlays, or rehabilitation
treatments, but no abrupt change of condition occurs with the
application of routine maintenance. Because any abrupt improve-
ment of condition shifts the performance curve upward, it can
generally be assumed that the upward movement of the perfor-
mance curve increases the useful life. In that case, the costs for a
routine maintenance will be expensed and the costs for overlays,
rehabilitation, and preventive maintenance treatments will be
 Table 1. Comparison of Valuation Methods by Features, Strengths, and Weaknesses 关after Falls et al. 共2001兲兴
Valuation technique Strengths Weaknesses
Value from historical cost: The value of an asset estimated • Easy to estimate if historical data • Does not consider service expectations
from its historical records, e.g., the cost of constructing a are available
pavement in 1969 共Lemer 1999兲
Book value: The worth of a depreciable property shown on • Good for financial accounting • Does not account for changes in prices
the accounting records of a company or an agency. It is the purposes
current value based on historical cost adjusted for • Provides fiscal health and • Neglects usage, and changes in technology
depreciation 共Sullivan et al. 2000兲 accountability and service standards
• Relatively simple if all data • Misleading results for older assets like
are available land, bridges.
• Provides direct comparison in
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time series progressions

Value from current replacement cost: The cost to construct • Good for management accounting • Replacement cost can be subject to
a new asset with the same functionality but not necessarily purposes market forces
with similar materials or specifications 共Herabat and • Reflects current prices and technology • Difficult to accommodate any upgraded
Sirirangsi 2001兲 or improved replacement of assets
• Considers asset’s current condition
•Easy to understand
Equivalent present value/worth: Represents worth “as-is” • Accounts for changes and prices • Neglect changes in technology and
based on the historic cost adjusted for inflation, depreciation, service standards
depletion, and wear 共Albitres 1999兲 • Useful for comparing rates of return • Requires many conjectural assumptions
Market value: The amount that will be paid by a willing • Simple concept • Subject to market forces, and value is
buyer to a willing seller for a property where each has equal very volatile
advantage and is under no compulsion to buy or sell 共Sullivan • Applicable to public agency disposal • Very limited applicability for agencies
2000兲 or sell off of assets managing roads
Productivity realized value: The net present value of the • Can be used to describe relative • Needs many assumptions and
benefit stream for the remaining service life of the asset. It is importance of assets nonmarket estimates
the amount the agency would be willing to pay not to lose
the asset 共Lemer 1999兲 • Subject to market forces

capitalized 共increasing asset value兲. Figs. 1共c and d兲 show the
variation of depreciation 共straight-line兲 rate and asset value with
pavement age. The figures show that when the expenditure is
capitalized, the original depreciable rate 共per year兲 changes. Since
a capital work increases the useful life, the depreciation rate may
increase or decrease depending on the type of MR treatments.
The book value would be difficult to calculate for agencies
with incomplete inventories and approximate financial records on
the historic costs of assets. Also, many infrastructure assets, such
as roads and bridges, contain many individual components re-
paired and replaced at different times; consequently, the task of
depreciation is complex 共Mead 2001兲. For these reasons, some
agencies may choose not to use this method when valuing their
existing capital assets 共KUTC 2000兲.
Replacement Cost Method
The condition of a pavement generally changes over time due to
accumulated damages and application of MR treatments. The
value of that pavement can be considered a function of the change
of condition. Since MR treatments are applied to most pavement
sections, any method used for asset valuation should include the
effects of MR treatments that change condition. The treatment
needs for a section of road can be determined based on its con-
dition, pavement layers, pavement materials, usage, and the agen-
cy’s policy to keep the pavement section at or above a designated
condition level. Since treatment needs depend on pavement con-
dition, current asset value can also be determined by a function of
treatment needs. Thus, asset value can be estimated using the
costs for a new pavement and treatment deficiencies.
A replacement cost can be defined as the cost required for
constructing a new pavement on the same alignment as the exist-
ing pavement excluding any right-of-way cost. This replacement
cost must include all relevant costs including the costs for plan-
ning, design, site preparation, earthwork, and construction of all
pavement layers. An estimate of these types of costs can be ob-
tained from records of similar recently constructed roads. Thus,
for an existing pavement, the value to an agency can be calculated
as the replacement cost reduced by the cost of deferred treatments
共treatment deficiencies兲. Deferred treatments are the ones that are
needed to achieve a designated condition, but were not funded
due to budget constraints. However, for this process of valuation
to work, the designated condition after treatment must be equal
to, or nearly equal to, the condition when the pavement is new.
The procedures for estimating the asset value for a pavement
using this approach are depicted in Figs. 2共a–d兲. The value of any
pavement is calculated as the value it would have if it were new
共replacement value兲 minus the cost of changing it from its present
condition 共deficient due to some degree of deterioration兲 to the
designated condition. For illustration purposes, the figures are
plotted based on a situation where no treatment was applied
during the pavement life. Fig. 2共a兲 shows a plot for a replacement
cost that can be considered constant with time, for illustration,
ignoring the effect of inflation or deflation. The pavement con-
dition generally deteriorates slowly initially, and it often de-
creases quickly after a certain time of deferring all treatment
needs 关Fig. 2共b兲兴. The cost of needed MR treatments generally
trends opposite the condition. There is a slow increase in costs
until the time of rapid decrease in condition which leads to a

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Fig. 1. Estimating capitalized pavement asset value and expenses
rapid increase in costs for needed work. Finally, the asset value
关Fig. 2共d兲兴, which is the replacement costs minus the costs of
needed work, reaches a point where it becomes practically con-
stant responding to a steady state pavement condition. At/after
this stage, the pavement deteriorates due to the damage in the
layers below the surface layers, and the value is the residual value
of the pavement asset.
Asset Value in Management System Framework
Fig. 3 provides a recommended asset management system frame-
work for managing a pavement network that incorporates asset
value in the processes 共FHWA 1999兲. It shows the flows and
relationships of the different modules of an asset management
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J. Infrastruct. Syst. 2005.11:202-210.
Fig. 2. Components for pavement valuation procedure
system. Pavement performance expectations consistent with
agency goals and policies, and available budgets must be estab-
lished and used in analyses to support decision making. The net-
work inventory data are collected based on agency policies and
goals. The inventory should be sufficient to provide necessary
information for management that can be used to estimate replace-
ment costs and funds needed for MR when combined with current
condition information to value the asset. The network perfor-
mance is evaluated based on agency selected performance
measures. Alternatives, consistent with long-range plans, policies,
goals, and constraints 共such as budget constraints—very common
in public agencies兲, are evaluated to find the most effective
program based on key performance measures, and the selected
program is then implemented. Reports incorporating input and
output summaries in tabular and graphic forms provide informa-
tion supporting decision making. The entire process of asset
management should be periodically evaluated through perfor-
mance monitoring and feedback.

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Fig. 3. Asset management system incorporating proposed key
elements
In managing a pavement network, MR funding decisions can
be made based on any or all of the following performance mea-
sures 共Dewan and Smith 2002兲:
• Pavement network condition;
• Network remaining life;
• Pavement asset values;
• Deferred funding needs; and
• Stop-gap costs, etc.
The variation of asset value in terms of agency and/or user
costs 共if society costs are ignored兲 can be utilized to demonstrate
how well an asset is performing and/or how well it is being main-
tained. The preservation of asset value of a pavement network
should be one of the goals of a managing agency and asset value
can be used as a decision factor when evaluating alternative in-
vestment strategies. Thus, asset valuation should be integrated
into an asset management system to monitor the well being of the
assets managed.
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J. Infrastruct. Syst. 2005.11:202-210.
Data Analyses Used in the Study
A California county database was used in this study. It contained
appropriate inventory and distress data. Initial data analyses were
conducted using the MTC PMS software. Further data analyses
using spreadsheets were necessary to incorporate calculations that
are not parts of the current version of the MTC PMS software.
This study presents the impacts of management and funding strat-
egies for a long-term 共20-year兲 analysis. The following para-
graphs describe the procedures used in the study.
Initial Data Analyses Using Metropolitan
Transportation Commission Pavement
Management System
The network level decision support software, MTC PMS, is being
used by many local agencies in their pavement management ac-
tivities in California and Oregon 共Smith 2002兲. The software can
be used to assess the condition of a road network, estimate treat-
ment and budget needs based on user defined decision trees and
condition triggers, define and adjust maintenance treatments and
costs, examine impacts of MR strategies, and produce specific
reports.
The MTC PMS was used to estimate network condition in
terms of PCI, and treatment costs needed for each year of the
analysis period were calculated based on PCI values. The funding
need was calculated based on the total need for 20 years to keep
the network condition at a desirable level. For any funding sce-
nario, analyses were conducted using a base budget method
which spreads the need 共or a fraction of need兲 throughout the
analysis period with a fixed base budget increase factor. Analyses
were conducted for different funding and management strategies
共scenarios兲 to identify the impacts of strategies on values. Analy-
ses were conducted for funding levels of 0 共zero兲, 70, 85, and
100% of the total funds needed over the 20-year period. It was
assumed that the agency had the policy to keep its pavement
network such that 85% of the network area would be at a PCI
level of 70–100 and less than 10% of the area in a PCI level of
0–50. The 70% funding scenario was selected based on the fact
that by about 4–5 years, the agency can achieve its policy. The 0
共zero兲 and 100% funding levels are the two extreme funding sce-
narios whereas 85% funding was chosen to see the impact for a
funding in between 70 and 100% levels. Two other situations,
only preventive maintenance 共“Only PM”兲 and only rehabilitation
共“Only Rehab”兲, were also evaluated. Only PM and Only Rehab
were analyzed with 85% of the total funding needs as a budget to
compare it with the other fund levels considered. For the Only
PM analysis, only sections with PCI values at or greater than 70
were considered for treatment and improved whereas sections in
lower conditions remained untreated and deteriorated with time.
Similarly, for the Only Rehab analysis, only sections with PCI
values less than 70 were treated and improved whereas sections
with PCI above 70 remained untreated and deteriorated with time
until the PCI value reached 70 or below.
In the analyses, the funds available 共budget兲 were first divided
into funds available for Rehab and funds available for PM. The
PM funds available were calculated as a percentage of the total
funds available, and the Rehab funds available were calculated as
the difference of the total funds available and the PM funds avail-
able. In case of limited funding, candidate sections for treatments
were prioritized for funding based on the weighted effectiveness
ratio 共ratio of the area under performance curve and unit cost of
treatment, multiplied by a weighing factor based on importance of
 road section兲 共Dewan 2002兲. When available funds were lower
than required for all needed work, the sections not selected were
considered backlogged. The nonallocated funds needed for the
backlogged sections were considered deferred, and stop-gap fund-
ing needs were generated for emergency maintenance. The stop-
gap costs are noncost-effective funds applied or needed to keep
the backlogged sections in serviceable condition. Stop-gap fund-
ing needs are required for backlogged rehabilitation sections if the
time since the last application of stop-gap maintenance funds is
equal to or greater than the stop-gap interval. This interval is
included in MTC PMS to control the frequency of possible stop-
gap treatments. The analyses were completed using base budgets
with a reasonable base budget increase factor of 3% and a stop-
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gap application interval of 5 years.

Asset Value Calculation
It would be ideal to get agency, user and society perspectives all
integrated in a valuation process. However, the values estimated
from different perspectives may not be added together to show the
total effect. In this demonstration, values were calculated based
on agency and user perspectives. The value from the society per-
spective was not included due to the complex nature of the valu-
ation method and low reliability of results.
Estimating Network Value in Agency Perspective
Network values to the agency were calculated using two different
methods. The first method measured asset value based on histori-
cal cost and straight-line depreciation, referred to as the book
value. The second value was calculated based on the current re-
placement cost and asset needs referred to as the value from the
asset management approach. A pavement management system can
include valuations from both the methods to evaluate alternative
funding and management strategies. However, for GASB 34, only
one method can be used per asset classification 共i.e. pavements兲.
Asset Value from Depreciation Accounting. A straight-line
depreciation method was used for the simplicity of calculations.
However, a depreciation schedule that depreciates slower at the
beginning, faster in the middle, and slower again at the end could
be more appropriate 共although unavailable兲 because of the nature
of pavement deterioration 共Dewan 2002兲. Since treatment costs
were included in this valuation method, a year-by-year valuation
technique was needed. Before calculating year-by-year deprecia-
tion values, it was essential to first estimate the network value at
the present year, which was the year before the base year. The
base year was the first year of analysis.
Depending on the data availability in the MTC PMS database
and considering the guidelines given in GASB 34 共GASB 1999兲,
the following steps were used to calculate book values at the
present year:
• Calculate current replacement cost of the sections as the prod-
uct of the unit replacement cost per unit area and the area of
the pavement section;
• Calculate the historical cost of the sections by deflating current
replacement costs to the construction/renovation year using an
appropriate price index;
• Estimate the useful life at construction/renovation as the sum
of the age and the current remaining life of the section;
• Calculate the residual value of the sections at the end of the
remaining useful life as the difference between the replace-
ment cost and the reconstruction cost;
• Calculate straight-line depreciation rate 共per year兲 using his-
Fig. 4. Useful life for estimating depreciation until the present time
torical cost, residual value, and useful life, and calculate accu-
mulated depreciation until the present year, using the follow-
ing equations:
Depreciation rate
= 共Historical cost − Residual value兲/Useful life 共1兲
• Subtract the accumulated depreciation 共depreciation rate mul-
tiplied by age兲 from the historical cost to determine the present
year book value
Present year book value
= Historical cost − Depreciation rate ⫻ age 共2兲
Price level indexes were obtained from the Federal Highway
Administration 共FHWA兲 website 共FHWA 2001兲. Fig. 4 shows the
calculation of useful life 共initial useful life兲 for estimating depre-
ciation until the present time. It also shows the remaining life at
the present year. Once the book value at the present year was
calculated, the values in subsequent years for a particular funding
strategy were calculated using the following equation:
共BV兲k = 共BV兲k−1 + 共MR costs兲k − 共Depreciation兲k 共3兲
where 共BV兲k⫽book value in year k; 共BV兲k−1⫽book value in
the year immediately prior to year k; 共MR costs兲k⫽MR costs
in year k; 共Depreciation兲k⫽depreciation in year k = 关共BV兲k−1
− RV共RL_AT兲k−1兴 / 共RL_AT兲k−1; 共RL_AT兲k−1⫽remaining life after
treatment in the year prior to year k; and RV共RL_AT兲k−1⫽residual
value at the end of the remaining life after treatment in the year
prior to year k.
Asset Value from Asset Management Approach The net-
work value in terms of agency perspective was estimated from the
replacement cost and the deferred treatment needs or treatment
deficiencies.
Pavement value = Replacement cost − Deferred treatment costs
共4兲
Deferred treatment costs were estimated using the MTC PMS
software. Replacement costs were estimated from the unit re-
placement cost per unit area of pavement surface and the area of
the surface.
Estimating Network Value in User Perspective
Since estimating VOC is easier and more reliable compared to the
other components of user costs, only VOC was considered in this

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J. Infrastruct. Syst. 2005.11:202-210.

 demonstration data analysis. Also, only VOC during normal traf-
fic operation 共not during construction operations兲 was considered
for the demonstration.
There was no recent study that could document the VOC for
current vehicles. However, it was found in studies conducted by
the World Bank during a Brazilian study that VOC varies directly
with road roughness 共Visser et al. 1994兲. Since the MTC PMS
uses only distress data to define road conditions, and uses the
predicted conditions and agency costs data to make management
decisions, a study was conducted in an effort to establish a cor-
relation between pavement roughness and pavement distresses
using data collected from roads and streets in the California
county. The objective of establishing such a correlation was that
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many agencies that use the MTC PMS software can utilize the
developed roughness model to estimate VOCs from distress mea-
surements without directly measuring international roughness
index 共IRI兲. The software MICROBENCOST 共NCHRP 1993兲 was
used to estimate user costs for different pavement conditions mea-
sured by pavement serviceability index 共PSI兲. IRI values were
converted to PSI values using an already established model 共Al-
Omari and Darter 1992兲. Necessary data to develop a direct cor-
relation between PSI and pavement conditions were not available.
A set of PCI and IRI data were collected on selected roads and
streets in the California county considered. Roughness data for
IRI calculation were collected using a Dynatest profilometer and
condition data for PCI were collected using walking distress sur-
veys. After necessary refinement of the data, a set of 52 pairs
of data was available for analyses. Since there was a time gap
between the collection dates, the PCI values were then projected
to match the dates of the IRI values. The projections were made
using the MTC PMS, which uses family performance curves
adjusted for observed performance. The parameters in the per-
formance model are selected based on pavement families which
are defined by functional classes and surface types of pavement
sections. Regression analyses were performed using the statistical
software SPSS 共SPSS 2002兲. All possible linear and nonlinear
models with different transformations were investigated. Regres-
sion analyses were conducted for all possible sets of data
for different functional classes and surface types, but only the
analysis considering all data together shows a reasonable correla-
tion. Based on the actual data and the boundary conditions, the
following nonlinear model was found to be the best model, con-
sidering PCI as the dependent variable and IRI as the independent
variable:
IRI = 18.6 − 3.41 ln 共PCI兲 共5兲
where IRI is in meters per kilometers.
Fig. 5 shows the scatter plot of the data with the regression
model. The model has an R-square value of 0.18 and a standard
error of estimate of 1.8 共units of IRI兲. Although the model only
captures 18% of the variability in the data, it can be a starting
correlation for the available data. If a dataset with roughness
measurements and condition surveys conducted around the same
time were available, a possibly better correlation could have been
developed.
Since the software MICROBENCOST was used to estimate
VOCs for different pavement conditions as PSI, some model re-
lating IRI and PSI was needed to estimate PSI from IRI. In this
study, present serviceability rating 共PSR兲 was used in place of PSI
as an input. PCI was calculated from pavement distresses, IRI
was estimated from PCI, and an additional relationship was
needed to estimate PSR from IRI. Considering numerous attempts
made in the past by many to correlate PSR and roughness data,
Fig. 5. Scatter plot of the data with the regression model
the following correlation developed by Al-Omari and Darter
共1992兲 was used for the present study.
PSR = 5e−0.26IRI 共6兲
where IRI is in millimeters per meter or meters per kilometers.
Al-Omari and Darter 共1992兲 developed several similar regres-
sion correlations using all available sets of data from different
states and pavement types, and suggested Eq. 共6兲 as to be usable
for all the states of the country.
The MICROBENCOST requires two major traffic informa-
tion, average annual daily traffic 共AADT兲 and percent of truck
traffic. The software can execute for individual functional classi-
fications, but the options do not include residential streets. For
residential streets, the same traffic data used for collector streets
were used. Because traffic information was not available for the
streets in the MTC PMS database, traffic data from the Highway
Performance Monitoring System 共HPMS兲 database were used.
Using the HPMS database, AADT for each functional class was
estimated by the weighted average of AADT values and corre-
sponding section lengths. The AADT values obtained were 7,500
for arterials, 5,000 for collectors, and 4,000 for residential streets.
Since, from the available data, the value obtained for the residen-
tial streets seemed far higher than normally expected, a value of
1,000 was used. The percentages of truck traffic were used from
Flexible Pavement Design Guide for Roads and Streets 共NSA
1994兲 and Design of Concrete Pavement for City Streets 共ACPA
1992兲. As inputs to MICROBENCOST, 5% truck traffic for col-
lector or residential streets and 7% truck traffic for arterial streets
were chosen. A reasonable traffic growth rate of 2.5% was used in
the program. The MICROBENCOST was used to estimate VOC
Fig. 6. Network book values

208 / JOURNAL OF INFRASTRUCTURE SYSTEMS © ASCE / DECEMBER 2005

J. Infrastruct. Syst. 2005.11:202-210.

 for the condition of the network in each year of analysis and for
each funding or management strategy.
There can be minor concerns over the estimated VOC because
of the use of several transformations 共PCI to IRI to PSR and
then VOC兲, but the estimated results seem logical. However, a
direct correlation between VOC and pavement conditions will
possibly provide more reliability. The estimation of VOC using
above-mentioned models and method can be considered as ex-
ploratory and further study is needed to develop a system for
widespread use.
Impacts of Strategies on Values
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Impact analyses for program selection should include several per-
formance measures such as condition, remaining life, value, de-
ferred needs, etc. Decisions based on only value can be mislead-
ing. For example, if an agency inappropriately spends a large
amount of money on a pavement 共such as a poor construction兲,
the book value can be high, but condition and service life can be
low. The current demonstration described the impacts of strate-
gies on asset values only, which should be integrated with impacts
on other performance measures to support decisions.
Fig. 6 shows book values 共in 2003 values兲 for different strat-
egies. The strategies and calculation techniques are described
earlier. Fig. 6 shows that a higher funding provides a higher value
for the asset. However, the two special cases, Only PM and Only
Rehab, having 85% of network needs as budgets indicate values
less than that of the 85% Fund strategy because of their applica-
tion of Only PM or Rehab treatments, respectively. The difference
of values among different scenarios increases with time, which
means that the rate of loss of asset value is higher in case of some
strategies such as lower funding levels. Therefore, more funding
or right strategy applied during early years will save money
which otherwise will cost more in the future to raise the value.
For a particular strategy, a decreasing trend with time indicates
that the asset is not being preserved. A strategy should preserve
the asset by keeping its value constant or increasing with time.
The decreasing trend of book values in all the strategies is a result
of the fact that the pavement network was not in a good condition
at the beginning of the analysis period and the asset needed more
funds allocated at the beginning of the analysis period. The analy-
ses in this study used a base-budget method for demonstration of
the asset management approach where a 100% funding option
spreads the 20-year needs evenly over the 20-year period rather
than addressing the initial backlog in the first year. It could be
possible to maintain or improve the network value by using a
yearly budget method with a yearly budget equal to the amount
found in the needs analysis. The MTC PMS has the capability to
use a yearly budget method for analysis, but it is more tedious.
The graphical report in Fig. 7 shows asset values for different
strategies. Since models relating IRI with PCI and IRI with PSR
for individual pavement functional classes were not available, it
was not possible to estimate asset values for each functional class
separately. The plots in Fig. 7 show that higher funding provides
higher values except for the Only PM and Only Rehab strategies.
The difference of values for different scenarios increases with
time. Like book values, a decreasing trend with time indicates
that the asset is not being maintained well. The sagging trend
indicates that asset values decrease for a while and then increase
again. In the long run, the Only PM and Only Rehab strategies
provide lower values than the 70, 85, and 100% funding strate-
gies. The Only Rehab strategy performs better than the Only PM
JOURNAL OF INFRASTRUCTURE SYSTEMS © ASCE / DECEMBER 2005 / 209
J. Infrastruct. Syst. 2005.11:202-210.
Fig. 7. Values from asset management approach
strategy in terms of value, but the Only Rehab uses much more
money for MR treatments resulting in a better network condition
than the Only PM strategy.
It is worth noting that a 100% funding does not necessarily
indicate a zero deferred needs. The asset value in any year for
100% funding is not necessarily equal to the replacement cost but
it is the replacement cost minus the deferred need in that year. It
is because of how the funding scenario analyses were performed.
The 100% funding need was calculated based on the total need
for 20 years to keep the condition at a desirable level. Then dif-
ferent funding scenario analyses were conducted using a base
budget method that spreads the total need throughout the 20 years
with a fixed base budget increase factor. Thus, there should be
some deferred needs at least during the early years of the analysis
period. In Fig. 7, positive slopes of some of the curves after about
15 years indicate that pavements are gaining values and values
are possibly approaching towards replacement costs.
The big differences between book values and values from the
asset management approach are caused by the approaches used to
calculate values. The book value at the beginning of the analysis
period was calculated by deflating the current replacement cost
to the construction or major renovation year and depreciating that
historical cost to the beginning of the analysis period without
taking into account the treatment costs spent since the date of
construction or major renovation until the beginning of the analy-
sis period. On the other hand, the value from the asset manage-
ment approach considers the current and projected conditions of
pavements, and the deferred cost is very small compared to the
replacement cost. Usually, an agency will use one of these two
methods of valuation for a particular asset, and the estimated
values will be used only as a decision support but not for selling
or buying the asset. However, since the asset management ap-
proach is more directly tied to the pavement condition, engineers
may prefer this approach to the book value method.
The user savings in VOC for a strategy was estimated by sub-
tracting the VOC for that strategy from the VOC for doing noth-
ing 共0% Fund兲. The savings for each year are plotted in Fig. 8 for
all the strategies considered. The increasing trends come from the
effect of traffic growth and the increasing differences of VOC
between any strategy and the 0% Fund strategy. As expected, the
100% Fund scenario saves the most, whereas the Only PM strat-
egy saves the least. Although the budget available in 85% Fund,
Only PM, and Only Rehab strategies were the same and the
money spent for Only Rehab strategy was almost the same as that
for the 85% Fund strategy, the Only PM and Only Rehab strate-
gies result the lowest savings in VOC.

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Fig. 8. Savings in vehicle operating costs
Conclusion
This paper discusses possible valuation methods and perspectives
of valuation for a pavement network and incorporated pavement
values in the management framework supporting pavement man-
agement decisions. A pavement network database was used to
demonstrate the estimation of pavement values and the impact
of management and funding strategies on asset values. Two valu-
ation methods—book value and value from asset management
approach—seem to be the two appropriate methods for valuing a
pavement network from an agency perspective. The value from
the user perspective was estimated based on relationships be-
tween pavement condition and vehicle operating costs. Asset val-
ues were calculated for each year of a 20-year analysis period
considering six different funding and management scenarios.
Plots of pavement values with time provide the asset manager
information that should be used while selecting a funding strat-
egy. Pavement values can be used along with other measures like
condition, life, etc., to evaluate potential program alternatives.
Based on the impact analyses in this demonstration study, it can
be concluded that it is better to provide a treatment when it is
needed. The results also show that Only PM and Only Rehab
strategies are not as good as other strategies with same level of
funding.
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