Novel Utility-Based Methodological Framework for Valuation of Road Infrastructure

Abstract

Transportation infrastructure assets are the largest publicly owned infrastructure assets in the United States. The management of these assets and the determination of their value have been at the forefront of discussions in many state agencies and local governments. However, existing valuation approaches are mostly based on physical condition and neglect the effect of factors such as functionality and overall use on the asset's value. This paper presents a utility-based methodological framework for the valuation of transportation infrastructure. The proposed valuation methodology uses the asset replacement cost as the base value. Value is then added to the base value by considering three key factors associated with the infrastructure: physical condition, functionality, and overall asset use. Each factor is characterized by appropriate indicators that can be quantified with specific performance measures. Then, the utility theory is applied to combine the effect of performance indicators of varying measures and scales on the value of an asset. The proposed framework can assist state and local transportation agencies in optimizing their resource allocation procedures for better coordination of asset investments within or across infrastructure assets.

Integrating Economic and Utility Concepts for a Comprehensive Bridge Valuation Model

“…The theory includes several basic assumptions and contextual conditions ( 36 , 37 ). As mentioned previously, utility theory has been adopted by researchers to develop a utility-based asset valuation model for transportation assets in numerous studies ( 12 , 18 , 38 ). Although this model has different versions in the literature, the core foundation of the utility-based concept is applying utility theory to asset valuation to account for the utility of roadways, which are generally too complex and computationally heavy to quantify by traditional economic means.…”

“…Although this model has different versions in the literature, the core foundation of the utility-based concept is applying utility theory to asset valuation to account for the utility of roadways, which are generally too complex and computationally heavy to quantify by traditional economic means. Porras-Alvarado et al proposed one latest published and applicable valuation framework ( 12 ). The framework was adopted to account for bridge asset value in relation to physical condition, functionality (safety and mobility), and capacity utilization.…”

“…( 11 ). Asset valuation also has the potential to serve as a comparative measure for resource allocation across assets as it helps justify funding requests for alternative strategies ( 12 ). Most traditional valuation techniques include book value, replacement cost, written down replacement cost, net salvage value, and market value ( 6 , 8 , 11 ).…”

“…Zhang and Peters proposed a productivity-based approach to the valuation of transportation infrastructure ( 18 ). Porras-Alvarado et al presented a utility-based methodological framework for the valuation of transportation infrastructure, which combines performance indicators of physical condition, functionality, and overall asset use to scale on the value of an asset ( 12 ). In NCHRP Report 590, Patidar et al developed optimization-based network- and bridge-level methodologies to address bridge management issues.…”

“…More recently, Stone established a framework to quantify the economic value of existing roadways by considering both direct and indirect economic factors ( 30 ). Porras-Alvarado et al also considered several economic factors of transportation assets in their utility-based model ( 12 ). Lim et al adopted a productivity-based asset valuation framework to consider multiple performance measures reflecting the economic productivity generated by the assets, as well as their capital value.…”