July 2010

How to Maximize Your Capital Investment Strategies

by John Saaty

John Saaty is president of Decision Lens in Arlington, Va.

From Stimulus Act dollars to statewide appropriations, few industries have as great a near-term opportunity to transform themselves as the transportation industry does. Transit provisions of the American Recovery and Reinvestment Act (ARRA) alone include $8.4 billion dollars for new capital investment for public transportation. State funding for the improvement of transportation and traveler safety is also high.

The question is, how can transit and transportation agencies capitalize on these opportunities? Are they changing processes quickly, thinking differently, and moving into a rapid deployment mode to take full advantage of their capital budgets?

Yes — and no. Many agencies have gone through the process of evaluating their current project lists or wish lists, identifying priority initiatives and where the dollars should be applied. But true transformation is rarely accomplished through this type of incremental advancement alone. It requires specific resources to be allocated to transformative initiatives. The real trade-off is often between how to balance supporting the base business and investing in change.

This article looks at collaborative decision-making software applied by both transit and transportation agencies to make the best possible decisions in capital planning and resource allocation. Regardless of the source of funds, these organizations are taking great strides in transforming American transportation.

Transit Stimulus Dollars

A prime example of an organization leading the way in responsible budgeting is the Washington Metropolitan Area Transit Authority (WMATA). Created by an interstate compact in 1967, WMATA is tasked with planning, developing, building, financing and operating a balanced regional transportation system in the national capitol area. The modes of operation include rail, metro, bus and paratransit services. WMATA serves a population of 3.4 million people within a 1,500-square-mile jurisdiction.

Originally estimated at $530 million, WMATA's stimulus budget was reduced to $325 million and, ultimately, to $200 million before the legislation was passed.

In January 2009, WMATA selected Decision Lens, a provider of decision support software solutions for government and commercial clients, as a partner in prioritizing its 2011- 2020 capital budget prioritization and allocation. WMATA's Capital Needs Inventory (CNI) includes approximately $11.3 billion of unconstrained needs that include life-cycle replacements, current conditions and future demand.

The CNI did not include system expansion projects (for example, an extension of service to Washington Dulles International Airport in suburban Virginia) or transit projects to be funded or implemented entirely by jurisdictions or debt repayment costs. WMATA intended to implement a structured, highly transparent process to prioritize all capital programs according to criteria that reflect agency goals.

A new capital decision-making process would allow the transit authority to evaluate capital programs, build consensus, and ensure consistency and repeatability when allocating available financial resources to the projects that yield the greatest return to WMATA customers. In addition to the pressing needs of the stimulus decision, the Office of Long Range Planning (PLAN) introduced a new process of collaboration, a new method of evaluation and a tool to evaluate the CNI. In December 2008, PLAN had already begun to conduct outreach to WMATA's Executive Leadership Team (ELT), the Jurisdictional Coordinating Committee (JCC), Riders' Advisory Council and Sustainability Group to develop the agency's Strategic Goals for the CNI, and to obtain greater support.

These goals were leveraged by the newly chartered Capital Planning and Advisory Committee - Technical (CPACT) in a facilitated brainstorming session to create measurable objectives. The CPACT consists of members across the entire organization, from IT to the specific modes (such as bus and rail) to Transit Police. This group is comprised of subject matter experts on the projects being proposed and the baseline situation across WMATA's services.

Goals and objectives related to the capital funding decisions were collaboratively developed and defined, and then socialized with the agency's decision makers, the ELT. The ELT, in a brief executive decision-making session, were asked to go through a "Pairwise Comparison" process. In this process, remotely controlled voting keypads enabled the executives to vote on priorities through a set of judgments in which two criteria are compared at a time until all criteria have been compared.

This "Pairwise Comparison" process derives criteria weights collaboratively, rather than by assigning arbitrary weights by an individual. During this process, the ELT represented all parts of the organization (CFO, IT, Operations, Corporate Strategy, Bus Operations, etc.), creating an opportunity for strategic discussion on where the organization should place its heaviest priorities.

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