Capturing Effects of Maintenance Practices in Highway Asset Valuation: Replacement-Cost Approach Versus Book-Value Method

Abstract

The replacement-cost approach and the book-value method as decision support tools for selecting maintenance alternatives under budget constraints and for capturing the effects of maintenance practices on highway asset value are investigated. By using a case study based on the Thailand Pavement Management System, the replacement-cost approach and the book-value method are applied to analyze maintenance alternatives for selected highways. The versatility of these asset-valuation methods is explored for capturing trade-offs in the type and timing of maintenance and for incorporating the added value of effective maintenance practices and the impact of deferred maintenance in the overall asset value. The study demonstrated that the replacement-cost approach is a more versatile tool for considering the maintenance-related value of highways in maintenance decision making, whereas the book value may be a simpler financial accounting tool. The two approaches may be used together to clarify how maintenance expenditures are being translated into facility replacement value or how the overall value of the infrastructure is being preserved. The study results are potentially useful to agencies interested in capturing the added value of effective maintenance practices in the overall value of their asset base.

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