Dynamic Project Portfolio Selection in Infrastructure Sector
Infrastructure networks are vital to the national economy. Their Asset Management (AM) should result in long-term economic efficiency and optimal service levels. For AM to live up to the expectations of infrastructure sector, it has to meet four key chall
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Abstract Infrastructure networks are vital to the national economy. Their Asset Management (AM) should result in long-term economic efficiency and optimal service levels. For AM to live up to the expectations of infrastructure sector, it has to meet four key challenges: 1) alignment of strategy and operations with stakeholder values and objectives; 2) balancing of reliability, service-level, safety, and financial considerations; 3) ensuring optimal packaging and timing of works, and adequate competition; and 4) promoting market development. Through educated decision-making, asset managers can actively develop their networks and use their limited budgets in a way that long-term goals and short-term budgets are met. In order to assist asset managers, a simplified Project Portfolio Selection Method (PPSM) is developed. The method applies the analytical hierarchy process (AHP) and real option ideology. PPSM aims at assisting infrastructure managers in optimising the life cycle profiles of their assets through selection of an optimal maintenance, repair and rehabilitation project portfolio. The developed method fills the void between strategic and operative decision-making methods facilitating management of multiple investments at the local network management level. Through the systematic, easy-to-apply project selection method, the asset manager can easily determine the optimal project portfolio and demonstrate the grounds to others. Keywords Infrastructure asset management, Project portfolio selection, Asset project appraisal
T. Koppinen VTT Technical Research Centre of Finland (at the time of writing), Skanska Oy (Current), P.O. Box 114, FIN-00101 Helsinki, Finland e-mail: [email protected] T. Rosqvist VTT Technical Research Centre of Finland, P.O. Box 1000, FIN-02044 VTT, Finland e-mail: [email protected] J.E. Amadi-Echendu, K. Brown, R. Willett, J. Mathew, Definitions, Concepts and Scope of Engineering Asset Management, © Springer 2010
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T. Koppinen, T. Rosqvist
Background
Road, rail, and water supply and sewerage networks are vital to the national economy. Because the economical and technical life of the networks after green-field investment is great, numerous rebuilds, replacements and expansions take place during their life time, highlighting the importance of Asset Management (AM). Reduction in public financing together with increasing use of the networks, urge infrastructure managers to optimize their networks focusing on overall costeffectiveness of their operations. In these circumstances, AM decision making should result in long-term economic efficiency and optimal service levels. For AM to live up to these expectations, it has to meet four key challenges: 1) alignment of strategies and operations with stakeholder values and objectives (Kaplan & Norton 2004); 2) balancing of reliability, service-level, safety, and financial considerations (Schneider et al. 2006); 3) ensuring optimal packaging and timing of works, and adequate competition; and 4) promoting market development (Koppi
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