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Does Asset Management Deserve a Closer Look?
"Asset management is more than a new management buzzword.
It's a sound business philosophy that merges the use of quantitative tools
with sound investment theories," said Darrel Rensink, chair of the task
force and director of the Iowa Department of Transportation. Before state transportation agencies fully embrace asset management, they want and need a better understanding of its meaning, impact, and value to their organizations. Asset management is a systematic process of maintaining, upgrading, and operating physical assets. However, offering a generic definition for asset management really does little to further its understanding. What may be more beneficial is comparative illustration that examines some of the differences and similarities between personal financial management and asset management. Although the comparison may be somewhat simplistic, it does offer some clarification to a complex business practice and philosophy. For purposes of this illustration, begin by making a mental list of your personal assets - real estate, cash, income, securities, furniture, fixtures, and vehicles. As you add to the list, it should start to become apparent that your personal assets are not all that different from those managed by state transportation agencies. Now consider the decisions you've faced regarding your personal finances. For example, we've all wondered at one point in our lives whether we should build new, maintain the property we already have, or lease/rent. We've had to figure out how much money we have at our disposal and then make decisions about how far it can be stretched. We've also thought about the ways we could allocate our resources to give us the best return on our investment. Again, you quickly discover these investment dilemmas are not that different from the decisions made by state transportation officials. Despite these common denominators, there are also some notable differences. For instance, there is a striking difference in the sheer numbers and values of assets maintained by states and those managed by individuals. There is also a stark difference between areas of responsibility. Most often, our personal assets are fairly limited. That makes them relatively easy to inventory and value. On the other hand, transportation agencies are responsible for hundreds of thousands of assets, many of which have not been inventoried, and most have no assigned values. Regarding areas of responsibility, in our personal lives, we have a duty to protect the financial and social well-being of ourselves and our families. In state government, however, the task of making sound investment decisions that affect the public at large can be an awesome responsibility. This difference alone should magnify the benefits of more states resolving to adopt asset management as a way to aid in investment decisions. What's Happening
in 1999?
Dena M. Gray-Fisher is the director of the Office of Media and Marketing Services for the Iowa Department of Transportation. She wrote this article on behalf of the AASHTO Task Force on Asset Management.
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